February 2007:

As previously reported on www.secunion.org, the Federal Service Impasses Panel (“FSIP”) entered an order in October regarding employee compensation issues at the SEC. That order requires, among other things, that future merit pay increases at the SEC must be tied to employee ratings under a new five-level performance evaluation system, which will be redesigned based upon the recommendations of a joint labor-management committee formed for that purpose. The joint committee’s work will be moving forward in the coming weeks, and its recommendations will likely have a substantial impact upon the efficacy of the performance-based pay system at the agency.

NTEU maintains that the SEC’s Merit Pay system must be built upon a foundation that includes not only a clear and reasonable performance management system, but also adequate and sustained funding, a prohibition against quotas in all forms, and transparency in every aspect of the program. Each of these prerequisites is essential but, to date, the SEC has not delivered.

With respect to funding, the SEC’s decisions have created problems for the Merit Pay system. For the first few years under the Merit Pay process, agency management opted to fund the system to an “average of a two,” leading managers to make Merit Pay recommendations that averaged two steps. In effect, this imposed a quota system with a predetermined number of employees receiving one, two or three step increases without sufficient linkage between those raises and actual employee performance ratings. This past year, the agency exacerbated this situation by only funding the system to an average of a little more than one step, further uncoupling actual performance ratings from the purportedly performance-based pay increases. We believe that the SEC should make funding the Merit Pay system a top budgetary priority, reflecting the value and importance of the agency’s employees to the SEC’s mission.

In addition to funding issues, the SEC’s Merit Pay system also has lacked transparency. The Government Accountability Office has noted that performance-based pay systems “should have adequate safeguards to ensure fairness and guard against abuse,” and that “one such safeguard is to ensure reasonable transparency and appropriate accountability mechanisms in connection with the results of the performance management process.” Human Capital, Implementing Pay for Performance at Selected Personnel Demonstration Projects, GAO-04-03 (January 2004), p. 36. The processes for evaluating employee performance and for determining Merit Pay increases should be disclosed and explained to SEC employees, and the decision makers should be identified. Transparency also should include providing information to employees concerning pay decisions, including the percentages of employees who have received specific raises in each office and division, as well as the average awards by position, the entire agency, and each unit within the agency.

The SEC should keep these important issues in mind as we work to develop a better performance management system.

by Chapter 293 President Greg Gilman