SALARY SYSTEMS OF THE FEDERAL SERVICE

MONDAY, SEPTEMBER 16, 1968

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMPENSATION OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in room 210, Cannon House Office Building, Hon. Morris K. Udall (chairman of the subcommittee) presiding.

Mr. UDALL. The Subcommittee on Compensation will come to order for the business scheduled for today.

Last year, when action was completed on the Federal salary increase and postal rate bill, it was apparent that in that legislation we had three pay raises for classified and postal employees, and employees of some of the other Federal salary systems, which would carry us into 1969.

In response to inquiries as to what the purpose of the chairman and the subcommittee would be with regard to salary legislation thereafter, I announced that the subcommittee would endeavor to hold hearings during 1968 to determine what should be done-what the policy should be-about salary legislation for the systems over which our subcommittee has jurisdiction.

The hearings beginning this morning are in fulfillment of the commitment that I made to hold such a general inquiry into this problem. I do not anticipate there will be any legislation resulting from these hearings this year, but I want to be able to have, for the members of the subcommittee and for myself and the staff, some general ideas this fall, from all of the various groups involved, what our policy should be in 1969.

Should we, for example, try to have another three-phase pay increase which would take us for 3 years, and maybe set a pattern of this kind, a review within a 3-year basis?

Should we go back to the annual pay bills which we have had during most of the time in the 1960's?

Should we consider some long-range plan to have automatic or semiautomatic adjustments for classified and postal employees?

Should we attempt to do something similar to the Wage Board's system for fixing salaries?

I have no precommitments or preconceptions of the answers here. I do not know the answer.

I am asking all the major Federal employee organizations and the administration to give us their tentative thinking this year, at least, on what the procedure should be in 1969 and in subsequent years.

I hope we will have some wide-ranging hearings and that we get a number of different suggestions. I trust that the employee organizations, particularly, will not be afraid that they will be committed to any particular position by giving us their present thinking. And I hope this will hold true of the witnesses today: That they will feel free to suggest what is on their minds, suggest alternatives. In other words, let us do some thinking aloud during the course of these hearings and see whether eventually we can arrive at a solution that will be the best one for the country, for the taxpayers, and for the Federal employees. With that introduction, I have asked the administration to be represented here today by Chairman Macy, of the Civil Service Commission. I have asked him to bring along some of his staff people so that we can begin these hearings on the basis I have outlined.

Mr. Macy, if you will come forward and bring your people with you. Unfortunately, I had contemplated we would have 2 hours this morning. However, the House meets at 11 and there are several bills from this committee which I want to be on hand for.

I do not know whether we will bring you back tomorrow for further questioning. We will discuss that after we see how far we get this morning.

STATEMENT OF JOHN W. MACY, JR., CHAIRMAN, CIVIL SERVICE COMMISSION, ACCOMPANIED BY O. GLENN STAHL, DIRECTOR, BUREAU OF POLICIES AND STANDARDS; HAROLD H. LEICH, CHIEF, POLICY DEVELOPMENT DIVISION; ROBERT F. MILKEY, CHIEF, PAY POLICIES SECTION; AND FRANK S. MELLOR, SENIOR SALARY POLICY OFFICER

Mr. MACY. Thank you, Mr. Chairman. I am happy to do whatever I can to advance the purposes you have described.

Mr. Chairman and members of the committee, I welcome this opportunity to present the views of the Civil Service Commission on a public policy matter of broad interest to the Congress, the executive branch, Federal employees and the American people: The improvement of compensation systems in the Federal Government. It is particularly gratifying to be invited to discuss this subject freed from the limits of specific compensation proposals. This approach permits a sweeping and unrestricted appraisal of existing pay systems and a thoughtful consideration of improvement measures to meet future needs. I commend your leadership, Mr. Chairman, in calling for such testimony at this time. This step is further evidence of your commitment to the objective of continuing progress in Federal compensation.

And progress has been notable with respect to compensation matters in recent years. Most notable of all was the significant advance achieved in the Federal Salary Act passed last year. That landmark act is a tribute to the hard work and imagination of this subcommittee under your chairmanship.

That act was an affirmative and sequential advance from the sound policy foundation laid down in the Salary Reform Act of 1962. It contributed in large measure to the improvement of Federal pay systems. Its benefits will be long lasting. It provides, for the first time, a systematic approach for the regular adjustment of salaries of top-level per

sonnel in all three branches of Government. It provides, again for the first time, for achieving full salary comparability with private enterprise for career employees by a specific date-July 1969.

The Government salaries must be reasonably competitive with private enterprise salaries if Federal managers are to attract and retain men and women who have the initiative, skills, and talents to carry out the essential national programs which are enacted by the Congress and directed by the President. The Federal enterprise must be able to compete with other employers in the Nation's labor market in a fair, prompt, and equitable manner. This is essential to accomplish. the people's work and to assure those that perform that work that their efforts are adequately compensated. I am pleased to join with you in discussing and planning the next steps for better meeting these objectives.

BACKGROUND

To open our review it will be helpful to describe the existing salary systems and the principles on which they are based.

There are a number of different systems each with somewhat different characteristics. Each system has a plan for arranging jobs or employees on the basis of predetermined criteria. These criteria may relate to the duties and responsibilities of jobs, or they may relate to the service and performance of individuals, or include some combination of these factors. Such a plan for arranging the jobs or employees is usually described as a classification system.

Accompanying the classification system is a schedule of salaries for the different grades and ranks-the pay system. The schedules generally provide a range of rates for each grade or rank, which may be used for various purposes-to reward employees for service or superior performance, to provide flexibility in recruitment, and to afford a choice of rates for use when an employee is promoted, demoted, or reassigned.

The classification systems require that their own tools and trained staff for proper application and administration. The tools may be job standards which will guide administrators in determining grades for positions, or qualification standards which will guide them in determining the rank levels for individuals. Through the classification plan the pay system is directly related to organization structure and position management, with manpower planning and with personnel staffing.

These classification plans are now under detailed study by the staff of Mr. Hanley's Subcommittee on Position Classification. Such a study will, of course, need to be closely tied to any changes in salary systems. The largest and basic pay system is the general schedule which now covers some 1,250,000 employees. It is based on the concept of job evaluation-classification-with the controlling criteria being the duties and responsibilities of jobs and the skills and knowledges that are required to perform them. The law provides broad definitions for 18 grade levels. The Civil Service Commission defines standards for each occupation to serve as guides in placing jobs in these grades. Each Federal agency has authority to classify individual jobs on the basis of these standards. The Commission inspects the agency performance in

making these classifications and audits specific jobs against the prescribed standards.

Agency personnel managers are constantly reviewing jobs to make the necessary classification changes required by changes in assignments, in programs, in organization, or incumbents. The Commission staff is constantly restudying occupations and revising standards to keep the guidelines realistic and relevant to rapidly changing characteristics of the occupations.

The postal field service system covers some 700,000 employees. Like the general schedule, it is founded on a duties classification plan, with its own separate pay schedule. It differs from the general schedule system in several respects:

It covers a much narrower range of occupations.

The law specifically names many jobs that must be placed in specific levels.

The principal schedule has 21 levels, and special provisions are made for rural carriers and fourth-class postmasters.

General administration of the system is vested in the Postmaster General.

The Commission is only involved in settling classification appeals.

The Veterans' Administration system for medical and nursing personnel covers some 20,000 employees. This system applies only to medical doctors, dentists, and nurses in VA hospitals. It contains some elements of rank based on duties and responsibilities but is essentially a system based on "rank-in-the-man." This means that the controlling determination of the grade of the individual is not as dependent upon the particular assignment as it is upon the qualifications and length of service of the incumbent. This system is controlled by the Administrator of Veterans' Affairs and, unlike the general schedule and postal systems, is coupled with an independent recruitment and promotion system.

The Foreign Service System covers about 20,000 employees. This is basically a "rank-in-the-man" system. It has eight levels for officers and 10 for the supporting staff. It applies only to personnel who serve a major share of their careers in overseas posts. Advancement in the system is similar to that in a military officer corps, with promotion on a selection basis to higher ranks and with "selection out" of those passed over for promotion. It too has an independent recruitment and promotion system.

Since 1962, for salary purposes only, these last three systems have been linked to the general schedule. This achieves the important objective of having the pay schedules for all four systems in a rational relationship. Under the comparability principle, the salary schedules for these four systems are annually adjusted on the basis of the Bureau of Labor Statistics nationwide survey of private enterprise salaries. There are other salary systems of lesser coverage. The Atomic Energy Commission has its own system and pay rates but, for the most part, follows the general schedule. The Tennessee Valley Authority has established its own system and sets its rates for blue-collar and most white-collar positions through collective bargaining. There is a Commissioned Corps in the Public Health Service whose members are paid under the military pay system. Executive secretaries and clerks

of local and appeal boards of the Selective Service System are paid in accordance with a plan established by the Director of Selective Service. This is by no means a complete list.

And then there is the executive schedule which applies to Cabinet officers, heads of independent agencies, under secretaries and assistant secretaries, and certain other top officials. That schedule has been directly related to salaries for Members of Congress and Federal judges. These high level salaries are now being reviewed by the first quadrennial Commission on Executive, Legislative, and Judicial Salaries, a most important creation of last year's salary act.

You will be interested to know that this Commission has been designated by the President, the Vice President, the Speaker, and the Chief Justice, as prescribed by the act, and has already met twice in its effort to meet the President's reporting deadline of December 1. The Commission is under the chairmanship of Frederick R. Kappel, former President of A.T. & T., and its members are-George Meany and John J. Corson, appointed by the President; Sidney J. Weinberg and Stephen K. Bailey, appointed by the Vice President; William Spoelhof and Edward H. Foley, appointed by the Speaker; and Jefferson B. Fordham and William T. Gossett, appointed by the Chief Justice. Frederick J. Lawton, former Bureau of the Budget Director and Civil Service Commissioner, has been named by the Commission to be Executive Director.

Each of these salary systems has its own characteristics but actions. taken with respect to one have their effect on others. Personnel under different systems work together, or in some instances employees under one system work for an officer or employee under another. Employees move between systems. Employees compare their pay with that of employees under other systems. There are employees under different systems who are performing essentially the same kind of work. Major changes in one system cannot properly be made without serious consideration of their possible impact on others.

COMPARABILITY PROCESS

The Salary Reform Act in 1962 established the statutory principle that Federal pay rates shall be comparable with private enterprise pay rates for the same levels of work. The principle is sound and the procedure for implementing it has become well established.

The comparability principle is sound because it is fair to the employee, fair to the public, and suitable to the needs of the Government as an employer. For the Federal employee it assures equity with his counterpart in the private sector of the economy. It permits him to know that such legitimate pay considerations as the cost of living and standard of living are being reflected in his pay, just as they are being reflected in going rates determined over bargaining tables and in other salary-determining processes throughout the private sector. For the public, it assures an objective, logical standard for setting Federal salaries. For the departments and agencies of the Government, it means the ability to compete on a fair basis with private employers for well-qualified personnel in the many occupational fields necessary to staff their vital activities, and it means improved ability to retain experienced employees on their staffs.