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U.S. Merit Systems Protection Board
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    Merit System Principles
      MSP 1 Q & A
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    Search & Site Index Merit System Principle 3: Equal Pay
	“Equal pay should be provided for work of equal  value, with appropriate consideration of both national and local rates paid by  employers in the private sector, and appropriate incentives and recognition  should be provided for excellence in performance.”
	 **What is the intent behind the third Merit  System Principle?** 
The third  Merit System Principle embodies the vision that maintaining equitable salaries  and rewarding excellent performance will attract and retain the most effective  and efficient federal workforce through positive employee engagement.
        The Classification  Act requires the classification of federal civil service positions in  accordance with their duties, responsibilities, and qualification requirements,  and mandates that in determining the rate of basic pay which an employee will  receive, “the principle of equal pay for substantially equal work will be  followed.”  5 U.S.C. § 5101(1)(A).  The various pay rates and systems in effect  today may be found at 5  U.S.C. Chapter 53 and here.
        It is the express  policy of Congress that “Federal pay fixing” for employees under the General  Schedule and the Prevailing Rate Systems (wage grade employees) be based on the  principle that there “be equal pay for substantially equal work within each  local pay area.”  5 U.S.C. §§ 5301(1), 5341(1).
        **What  does it mean to give “appropriate consideration [to] both national and  local rates paid by employers in the private sector”****?**
          Congress has codified its policy that federal  pay rates be comparable with non-federal pay rates for the same levels of work  within the same local pay area, except when the President provides for an  alternative level of payment due to a national emergency or other serious  economic condition.  5 U.S.C. §§ 5301(3-4), 5304(a), 5341.  The President establishes rates of pay within  localities with the advice of his Pay Agent, designated  under 5 U.S.C.  § 5304(d)(1).  The Pay Agent, in  turn, receives salary recommendations from the President’s Federal Salary Council,  established under 5 U.S.C.  § 5304(e)(1), and the Federal Prevailing Rate Advisory Committee,  established under 5 U.S.C.  § 5347(a).  The Federal Salary Council  evaluates surveys conducted by the U.S. Bureau of Labor Statistics of salary  data for non-federal jobs throughout the country.  The Federal Prevailing Rate  Advisory Committee surveys private employers, at least every two years, to  determine the prevailing wage in designated regions throughout the country.
        **What  is the MSPB’s adjudicatory role in ensuring equal pay is provided for equal  work?**
          Although  classification determinations are the purview of the Office of Personnel  Management, the MSPB may review pay issues in certain circumstances.  For example, the Equal Pay Act of 1963  amended the Fair Labor Standards Act to forbid employers from engaging in pay  discrimination and require that employees of both sexes be paid equitably for  work requiring equal skill, effort, and responsibility performed under similar  working conditions.  29 U.S.C. § 206(d).  An Equal Pay Act claim may be alleged as an  affirmative defense in an MSPB mixed case in which the MSPB has jurisdiction  over an adverse action.  5 U.S.C. §§ 2302(b)(1)(C), 7702(a)(1)(B)(ii).  Issues involving pay setting may also come  before the MSPB in a whistleblower reprisal case, because “a decision  concerning pay” is a covered “personnel action” under 5 U.S.C. § 2302(a)(2)(A)(ix).  Pay issues may also come before the MSPB in  situations where the MSPB has ordered status quo ante (make whole) relief, when  it has reversed or mitigated an agency action or ordered corrective  action.  *Kerr v. National Endowment for the Arts*, 726  F.2d 730, 733 (Fed. Cir. 1984).
        **Why is it important to recognize excellent performance?**
          During debate on the Civil Service Reform Act of  1978, then-Senator Joe Biden stated that “the most important part of civil service  reform must be to motivate good employee performance.”  S. Rep. No. 969, at 1718 (1978).  Indeed, in the MSPB’s study entitled “Managing  for Engagement– Communication, Connection, and Courage,” the MSPB concluded  at pages 43-58 that recognition of employees’ performance contributions is one  of the key “drivers” of positive employee engagement and retention.
        **In what ways do federal agencies reward excellent performance?**
          Agencies must construct performance appraisal systems  for their employees through which performance may be recognized by granting within-grade  salary increases, career ladder promotions, or other awards. *See* 5 U.S.C. § 4302.  Agencies must maintain an incentive awards  program which recognizes and provides various types of awards to individual  civil service employees whose significant contributions improve government performance.   5  U.S.C. Chapter 45; 5 C.F.R. Part 451.   These types of awards include performance-based cash and time-off  awards, special act awards, awards for beneficial suggestions, and  recommendations for Presidential awards.
        **What  is the MSPB’s adjudicatory role in the performance recognition process?**
          The MSPB does not  generally have jurisdiction over performance recognition questions.  However, the failure of an agency to grant a  within-grade salary increase or its decision to demote or remove an employee  for poor performance may be appealed to the MSPB.  5 U.S.C. § 4303(e); 5 C.F.R.  §§ 432.106(a); 531.410(d); 752.405(a).
        Additionally,  issues involving awards and promotions may come before the MSPB in a  whistleblower reprisal case, because “a promotion” and “a decision concerning  awards” are covered “personnel actions” under 5 U.S.C. § 2302(a)(2)(A)(ii),(ix).  These issues could also come before the MSPB  as “conditions of employment” in a military status discrimination case brought  under the Uniformed Services Employment and Reemployment Rights Act of 1994  (codified at 38 U.S.C.  §§ 4301-4333) (USERRA).   Finally, such issues may come before the MSPB in situations where the  MSPB has ordered status quo ante (make whole) relief, when it has reversed an agency  action or ordered corrective action.  *See Kerr v. National Endowment for the Arts*, 726  F.2d 730, 733 (Fed. Cir. 1984).
        **Has the MSPB studied issues related to compensation?**
           MSPB studies of compensation have addressed the fairness issue inherent in providing equal pay for equal work, as well as the need to reward excellent performance as a key aspect to merit systems. In the 2011 study, Women in the Federal Government: Ambitions and Achievements, the MSPB compared pay levels between men and women and explored factors that likely contributed to these differences. Pay and status issues across ethnic and racial groups were also examined in the 2009 report Fair and Equitable Treatment: Progress Made and Challenges Remaining. The MSPB concluded that while trends show improvement in closing pay gaps, disparities remain in salary levels for most minority groups and women compared to white men, principally due to their under-representation in certain higher paying occupations and managerial positions.
        Designing an Effective Pay for Performance System (2006) summarized key decision points to consider when developing a compensation system that ties pay and awards directly to performance. As noted earlier, in a 2009 study entitled Managing for Engagement–Communication, Connection, and Courage, MSPB’s research noted that recognition of employees’ performance contributions is one of the key “drivers” of positive employee engagement and retention. Additionally, Federal Employee Engagement: The Motivating Potential of Job Characteristics and Rewards (2013) noted that although the majority of employees (78 percent) report that they find cash awards to motivate them to stay with their organizations, eight other factors (e.g., personal satisfaction with work, interesting work, job security, performing public service) were more frequently noted. This serves as a reminder that there are many alternatives to cash as retention incentives.
        Nevertheless, it remains essential that supervisors distribute rewards in a fair and equitable manner based on sound and transparent decisions. However, results of the Merit Principles Survey over time indicate that Federal employees remain skeptical about the ability and/or willingness of supervisors to recognize and reward excellent performance. These findings have been summarized in reports such as Managing Public Employees in the Public Interest: Employee Perspectives on Merit Principles in Federal Workplaces (2013), Managing for Engagement: Communication, Connection and Courage (2009), and Accomplishing Our Mission: Results of the 2005 Merit Principles Survey (2007).


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