Proposed Bill Hopes to Address Pay Compression in the Public Sector

In testimony on Capitol Hill and in writing to the Biden administration, the Senior Executives Association (SEA) has long been calling for government action on pay compression in the public sector.

Appearing before the Federal Salary Council on Oct. 28, 2022, for instance, SEA Director of Policy Jason Briefel spoke to how pay compression can lead top talent to sour on the idea of continuing their career development in the public sector.

“Pay compression skews the risk-reward trade-off for employees advancing in their federal careers,” Briefel told the Council during his testimony. “At a certain point, the risks of advancing in management continue to grow but the rewards do not keep pace.”

In the recent letter to the Biden administration, SEA acknowledged the recently proposed regulations that would create four new pay locality areas, which would equate to bigger raises for more than 30,000 federal employees next year. But taking such a step “when systemic compensation issues holistically undermine the government’s competitive posture is akin to rearranging deck chairs on the Titanic,” according to SEA. “It is not enough.”

Recently introduced legislation aims to go a step further toward addressing pay compression in the public sector.

The Federal Employee Pay Compression Relief Act of 2023 would allow federal employees who reach the pay cap in their pay system to receive the base and locality pay adjustments they would otherwise be entitled to, according to a statement from Congresswoman Eleanor Holmes Norton (D-D.C.), who introduced the legislation. Currently, federal employees who reach the pay cap do not receive such adjustments.

“This bill would allow many of the longest-serving federal public servants … to receive the pay adjustments they would be entitled to, but for the pay cap,” said Norton, a senior member of the Committee on Oversight and Reform, which has jurisdiction over federal employees. “This bill would help the federal government hire and retain the most qualified individuals.”

A Step in the Right Direction?

In a recent piece summarizing the proposed bill, Federal News Network’s Drew Friedman outlines the factors driving pay compression in the federal government.

“Pay compression exists on the General Schedule (GS) because, according to federal statute, salaries for career GS employees cannot exceed pay rates for political appointees and others at level IV on the Executive Schedule,” Friedman explained.

“Even though Congress or the president raise federal employee salaries each year, a pay cap has remained in place for those on the Executive Schedule, and therefore also for some GS-15s, depending on where they work and their spot on the federal career ladder.”

As Friedman noted, the 5.2% federal pay raise the White House proposed for 2024 would not extend to those at the senior-most levels of government if it were to bring their salary above the currently set pay cap. And, while describing the bill that Norton recently introduced as “a step in addressing pay compression,” Friedman points out there is more work to be done on the federal pay reform front. Professional Managers Association National Vice President Kelly Reyes echoed that sentiment.

“With more than 100 overlapping white collar pay systems, it is not clear that this bill would not impact managers on the IRS’s alternative pay scale, thus continuing to create a system of winners and losers that disincentivizes careers in management,” Reyes told Federal News Network.

“The General Schedule requires much more comprehensive reforms to address the continued pay compression at the higher ranks of government and to bring federal compensation into the modern era.”