In February, the SEC announced its intention to suspend its merit pay program for 2008 by temporarily separating it from the performance evaluation process, while it continues to work with NTEU to create a new, fairer process for evaluating employees. In April, NTEU and the SEC reached an agreement on implementation of this temporary separation of merit pay from the appraisal process.

This agreement has three main components. First, all employees who are rated “acceptable” this year will receive an equivalent percentage salary increase. These salary increases will be the same percentage increase for everyone, and the percentage will be based upon the total amount funded by Congress for performance pay increases at the agency. NTEU is currently working closely with individuals involved with the budget process in Congress in an effort to maximize the SEC’s merit pay budget for this year.

The second component of the agreement is the SEC’s implementation of the elimination of “steps” and shift to the use of “ranges” in its pay schedules. This change was ordered by the Federal Service Impasses Panel at the SEC’s request during compensation negotiations with NTEU in 2006.

The SEC intended to implement this change in the new performance management system that will replace the fundamentally flawed merit pay system. The advantage gained by making the change now is that the equivalent percentage pay raises given to employees this year will be greater because the agency will be able to give employees the entire percentage increase budgeted by Congress, rather than the nearest step increase that does not exceed that percentage. For example, if the budget provided for 2%, employees would receive a 2% increase, rather than one step, which would be less.

The third component of the agreement is the SEC’s acceptance of NTEU’s “fair share” approach going forward. This is very important because, due to the implementation of ranges, when the new pay system is agreed upon by the SEC and NTEU employees will no longer receive “step increases” for their merit pay awards. Instead, they will receive “shares” that are associated with the rating level that they receive.

In 2006, the Federal Service Impasses Panel granted authority to the SEC to unilaterally determine the pay increase that would be associated with each share/rating level. Without the “fair share” agreement, the SEC could have attempted to exercise this authority unfairly. As an extreme example, the SEC might have opted to give $20,000 pay raises to a handful of employees at one rating level, while giving $10 pay raises to employees at another lower rating level.

Under “fair share,” employees who receive merit pay increases under any new system will receive either one, two or three shares, with the value of a single share being an equal percentage increase. The value of a “share” as a percentage increase in salary will depend upon the number of employees at each rating level in a particular year, and the overall budget for performance-based pay increases for that year.

The SEC and NTEU have not yet reached an agreement on the new performance appraisal system itself, although the parties are continuing to work towards that goal. Meetings on this process occurred in May and will continue throughout the summer.