Federal Workforce: Payroll and Human Capital Changes During Downsizing
(Chapter Report, 08/13/1999, GAO/GGD-99-57).

Pursuant to a congressional request, GAO provided information on the
factors causing the federal payroll to increase while the number of
federal employees decreased during downsizing, focusing on the extent to
which each major factor contributed to the increase in the federal
payroll during fiscal years (FY) 1993 through 1997.

GAO noted that: (1) between the beginning of FY 1993 and the end of FY
1997, the total federal payroll grew by $8.7 billion to $102.4 billion,
while the size of the federal workforce decreased from 2.2 million
employees to 1.9 million; (2) in real terms, however, overall federal
payroll costs decreased because, in 1997 constant dollars, the payroll
declined by $2.4 billion during the 5-year downsizing period; (3)
because the decrease in the number of employees for the most part offset
actual aggregate payroll cost increases for those employees remaining on
the payroll, GAO calculated payroll costs for a constant workforce of
1.9 million employees over the 5-year period to isolate the payroll cost
increases and their causes; (4) on this basis, GAO estimated that,
between FY 1993 and FY 1997, payroll costs in nominal dollars increased
about $11,600 per employee and approximately $21.6 billion in total; (5)
for comparison, in terms of 1997 constant dollars, this payroll increase
was approximately $6,460 per employee and $12.0 billion for 1.9 million
employees; (6) the increased payroll costs were attributable to several
causes, but the predominant cause was the annual pay comparability
adjustment that is intended to keep federal pay competitive with that of
nonfederal employers; (7) the cost of employee benefits and changes in
the characteristics of the federal workforce also played a major role in
increasing the overall federal payroll cost; (8) employee benefits
increased due primarily to: (a) incentives paid to separating employees;
(b) the increasing proportion of employees in the Federal Employees'
Retirement System (FERS) and the increasing cost of the government's
required match for FERS employees' Thrift Savings Plan contributions;
and (c) increases in health insurance costs; (9) changes in the
characteristics of the federal workforce that increased payroll costs
included: (a) career step increases based on tenure and satisfactory
performance; (b) promotions; and (c) pay increases due to high quality
performance; and (10) the payroll cost increases that resulted from
these factors, however, were partially offset by the limited hiring of
staff, at grades below the governmentwide average, whose lower pay
levels helped dampen the overall average payroll and grade increases.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-99-57
     TITLE:  Federal Workforce: Payroll and Human Capital Changes
	     During Downsizing
      DATE:  08/13/1999
   SUBJECT:  Compensation
	     Federal employees
	     Employee buyouts
	     Federal downsizing
	     Payroll records
	     Employee benefit plans
IDENTIFIER:  Federal Thrift Savings Plan
	     Federal Employees Retirement System

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    United States General Accounting Office GAO              Report to
    Congressional Requesters August 1999      FEDERAL WORKFORCE
    Payroll and Human Capital Changes During Downsizing GAO/GGD-99-57
    United States General Accounting Office GAO Washington, D.C.
    20548 B-280545 August 13, 1999 The Honorable Fred Thompson
    Chairman, Committee on Governmental Affairs United States Senate
    The Honorable Thad Cochran Chairman, Subcommittee on International
    Security, Proliferation and Federal Services Committee on
    Governmental Affairs United States Senate This report, prepared at
    your request, provides information on the factors causing the
    federal payroll to increase while the number of federal employees
    decreased during downsizing and summarizes our prior studies on
    the impact of downsizing on human capital. Specifically, the
    report identifies the extent to which each major factor
    contributed to the increase in the federal payroll during fiscal
    years 1993 through 1997. The factors relate primarily to the
    current system for compensating federal employees, a prominent
    topic in the Office of Personnel Management's strategic plan and
    an area that will need additional consideration as the government
    evaluates the guiding principles and best practices for addressing
    a wide range of federal human capital issues. In this regard, we
    believe a strong link is needed between human capital planning and
    agencies' strategic and programmatic approaches to accomplishing
    their missions. Accordingly, in this report we are recommending
    that Congress, in considering buyout legislation, continue to
    require agencies to prepare and submit strategic buyout plans for
    congressional review as a prerequisite for implementing buyout
    authority and to implement downsizing consistent with the results
    of their planning efforts. As agreed, unless you announce the
    contents of this report earlier, we plan no further distribution
    until 30 days from the date of this letter. At that time, we will
    send copies of this report to Senator Joseph I. Lieberman, Ranking
    Minority Member, Senate Committee on Governmental Affairs; Senator
    Daniel Akaka, Ranking Minority Member, Subcommittee on
    International Security, Proliferation and Federal Services, Senate
    Committee on Governmental Affairs; Representative Dan Burton,
    Chairman, and Representative Henry A. Waxman, Ranking Minority
    Member, House Committee on Government Reform; and Representative
    Joe Scarborough, Chairman, and Representative Elijah E. Cummings,
    Ranking Minority Member, Subcommittee on Civil Service, House
    Committee on Government Reform. We will also send copies to the
    Honorable Janice R. Lachance, Director, Office of Personnel
    Management. Copies will be made available to others upon request.
    Page 1                               GAO/GGD-99-57 Payroll and
    Human Capital Changes During Downsizing B-280545 Please call me on
    (202) 512-2700 if you have any questions concerning this report.
    GAO contacts and major contributors to this report are
    acknowledged in appendix III. Nancy R. Kingsbury Acting Assistant
    Comptroller General Page 2                             GAO/GGD-99-
    57 Payroll and Human Capital Changes During Downsizing Page 3
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary Since 1991, Congress and the Bush and Clinton
    administrations have been Purpose             reducing federal
    employment levels as a means of restructuring the workforce and
    reducing federal costs and budget deficits. The Department of
    Defense (DOD) and non-DOD agencies have been using pay separation
    incentives-commonly known as buyouts-to induce employees to
    voluntarily leave federal service. During fiscal years 1993
    through 1997, the federal civilian workforce (excluding the Postal
    Service) was reduced by almost 300,000 employees, or 13.8 percent.
    At the same time, the federal civilian payroll-basic pay, premium
    pay, and benefits-increased by 9.3 percent, to $102.4 billion. In
    addition, in analyzing this reduction in the federal workforce,
    GAO and others have raised concerns about the implications of
    downsizing on the employees-a human capital issue. In view of the
    significance of these issues, the Chairmen of the Senate Committee
    on Governmental Affairs and its Subcommittee on International
    Security, Proliferation and Federal Services asked GAO to
    determine why, during a period of downsizing, the federal payroll
    increased while the number of federal employees decreased. In
    response, GAO analyzed data from the Office of Personnel
    Management's (OPM) Central Personnel Data File (CPDF) of federal
    employees and reports on work years and personnel costs. GAO
    identified the major factors and the extent to which each
    contributed to the increase in the federal payroll during fiscal
    years 1993 through 1997, and interviewed officials at selected
    agencies to determine some of the reasons why the cost of these
    factors increased. GAO also agreed to summarize prior GAO studies
    on the impact of downsizing on human capital. Between the
    beginning of fiscal year 1993 and the end of fiscal year 1997,
    Results in Brief    the total federal payroll grew by $8.7 billion
    (9.3 percent) to $102.4 billion, while the size of the federal
    workforce decreased from 2.2 million employees to 1.9 million.1 In
    real terms, however, overall federal payroll costs decreased
    because, in 1997 constant dollars, the payroll declined by $2.4
    billion during the 5-year downsizing period.2 Because the decrease
    in the number of employees for the most part offset actual
    aggregate payroll cost increases for those employees remaining on
    the payroll, GAO calculated payroll costs for a constant workforce
    of 1.9 million employees over the 5-year period to isolate the
    payroll cost increases and their 1 The numbers represent the
    number of full-time equivalent employees or work years, which
    generally consist of one or more employed individuals who
    collectively complete 2,080 work hours in a given year. 2 GAO
    normalized dollar amounts to 1997 inflation adjusted or constant
    dollars for overall payroll comparisons. However, GAO primarily
    used nominal dollars in the analyses because it allowed us to
    illustrate all the causes of the payroll increase, some of which
    were related to inflation and some not. Page 4
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary causes. On this basis, GAO estimated that,
    between fiscal years 1993 and 1997, payroll costs in nominal
    dollars increased about $11,600 per employee and approximately
    $21.6 billion in total.3  For comparison, in terms of 1997
    constant dollars, this payroll increase was approximately $6,460
    per employee and $12.0 billion for 1.9 million employees. The
    increased payroll costs were attributable to several causes, but
    the predominant cause was the annual pay comparability adjustment
    that is intended to keep federal pay competitive with that of
    nonfederal employers. (See figure 1.) The cost of employee
    benefits and changes in the characteristics of the federal
    workforce also played a major role in increasing the overall
    federal payroll cost.  Employee benefits increased due primarily
    to (1) incentives paid to separating employees, (2) the increasing
    proportion of employees in the Federal Employees' Retirement
    System (FERS) and the increasing cost of the government's required
    match for FERS employees' Thrift Savings Plan (TSP) contributions,
    and (3) increases in health insurance costs. Changes in the
    characteristics of the federal workforce that increased payroll
    costs included (1) career step increases based on tenure and
    satisfactory performance, (2) promotions, and (3) pay increases
    due to high quality performance. The payroll cost increases that
    resulted from these factors, however, were partially offset by the
    limited hiring of staff, at grades below the governmentwide
    average, whose lower pay levels helped dampen the overall average
    payroll and grade increases. (See figure 1.) 3 GAO did not have
    the data necessary to determine the exact payroll costs for the
    1.9 million employees or for the net reduction of 300,000
    employees during fiscal years 1993 through 1997. Therefore, GAO
    used the difference between the average payroll cost per employee
    for 2.2 million employees in 1993 and 1.9 million employees in
    1997 to approximate a $21.6 billion payroll increase for a
    constant workforce of 1.9 million employees. Page 5
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary Figure 1: Percentage Effect of Various Factors
    Contributing to Federal Payroll Increase, Fiscal Years 1993-1997
    Source: GAO calculations based on OPM data. The various factors
    that caused the payroll increase were not unique to the downsizing
    period. The most significant factor contributing to the increased
    payroll, the annual pay comparability adjustment, increased at a
    somewhat lower rate during downsizing than in the preceding 5-year
    period. Benefit cost increases, another significant contributor to
    payroll cost increases during downsizing, increased about 29
    percent less than in the 5-year period before downsizing. Career
    step increases, promotions, performance pay, and hiring and
    separation patterns all contributed to changes in the
    governmentwide averages for employees' grade and payroll cost from
    fiscal years 1993 through 1997. These changes in the
    characteristics of the workforce resulted in an average grade
    level increase of about one-half grade, from the beginning to
    about the mid-point of GS-9. This increase of about one- half
    grade during downsizing was similar to the average grade increase
    in the 5 years before downsizing. The separation and hiring
    practices employed by the agencies during downsizing also
    contributed to substantially greater increases in Page 6
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary employees' average age and service time during
    downsizing than occurred during the previous 5-year period. The
    implications of changes during downsizing on the government's
    human capital will require continuing attention. GAO reviews have
    found, for example, that a lack of adequate strategic and
    workforce planning during initial rounds of downsizing by some
    agencies may have affected their ability to achieve organizational
    missions. Some agencies have reported that downsizing in general
    led to such negative effects as the loss of institutional memory
    and an increase in work backlogs. In a study of six agencies'
    experiences in the later stages of the downsizing effort, GAO
    found that most had planned and implemented buyout programs more
    effectively than had agencies during the initial rounds of
    downsizing and had generally linked buyouts to achieving specific
    organizational objectives. This increase in buyout program
    effectiveness was due in part to a statutory requirement (P.L.
    104-208) that agencies prepare and submit strategic buyout plans
    for congressional review prior to implementing their buyout
    authority. Most of the recent and pending legislation to provide
    buyout authorities requires specified agencies to prepare and
    submit strategic buyout plans for congressional review prior to
    implementing buyouts. GAO is recommending that Congress continue
    these requirements. At the end of fiscal year 1997, the federal
    workforce was composed of Background    about 1.9 million
    employees, excluding postal employees. About 1.6 million employees
    were in white-collar positions, most of which are covered by the
    General Schedule (GS). The Federal Wage System covered the
    remaining trade, craft, and labor employees. GS and wage system
    employees have separate pay schedules consisting of individual
    grades and steps within grades. The federal payroll has three
    primary components-basic pay, premium pay, and the cost of
    benefits provided to employees. Basic pay consists of salaries and
    wages paid directly to employees for duties performed during the
    regular workweek. Premium pay is supplemental pay for overtime
    work in excess of the regular workweek, which is generally an 8-
    hour day and 5-day week, and for work at night and on Sundays and
    holidays, as well as for availability duty. Benefit costs include
    health and life insurance premiums, retirement and Thrift Savings
    Plan contributions, and separation pay. Page 7
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary Pay adjustments for the federal workforce have
    traditionally occurred on an annual basis. Under the Federal
    Employees Pay Comparability Act of 1990, pay adjustments for the
    majority of the workforce are to consist of two components: (1) a
    nationwide basic pay increase linked to the Employment Cost Index
    (ECI) and (2) individual locality pay adjustments that apply to
    specific geographical areas where nonfederal pay exceeds federal
    pay by more than 5 percent. Beginning in 1994, the locality pay
    component of the pay adjustment was to be phased in over a 9-year
    period to reduce the then estimated pay gap of about 28 percent. A
    different statutory pay system, based on comparability with local
    prevailing wage rates, applies to wage system employees. Principal
    Findings Between the beginning of fiscal year 1993 and the end of
    fiscal year 1997, Overview of Federal Payroll the total federal
    payroll grew by $8.7 billion (9.3 percent) to $102.4 billion,
    Changes                             while the size of the federal
    workforce decreased from 2.2 million employees to 1.9 million. In
    real terms, however, overall federal payroll costs decreased
    because in 1997 constant dollars the payroll declined by $2.4
    billion during the 5-year downsizing period. The payroll cost
    could have been about 16 percent higher in nominal dollars had
    there been no employment reductions and had the average pay per
    employee increased annually at the rate experienced during
    downsizing. However, this estimate cannot be used as a downsizing
    savings estimate because it does not consider all downsizing
    costs, such as the amount of separation payments and payments to
    contractors to provide services previously provided by downsized
    employees. For example, a prior GAO review found that 5 of the 24
    agencies reviewed were contracting for work previously done by
    employees who had taken buyouts, to compensate for their reduced
    workforces. Because the decrease in the number of employees offset
    actual aggregate payroll cost increases for those employees
    remaining on the payroll, GAO calculated payroll costs for a
    constant workforce of 1.9 million employees over the 5-year period
    to isolate the payroll cost increases and their causes. On this
    basis, GAO estimated that, between fiscal years 1993 and 1997,
    payroll costs increased about $11,600 and $6,460 per employee in
    nominal and constant dollars, respectively, and approximately
    $21.6 billion in total nominal dollars. In terms of 1997 constant
    dollars, the total payroll increase was $12.0 billion. Page 8
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary The increased payroll costs were attributable
    primarily to the annual pay comparability adjustments that the
    President recommended and that were agreed to by Congress. These
    adjustments are intended to keep federal pay competitive with that
    of nonfederal employers. Other factors that directly increased the
    compensation of federal employees were increases in the costs of
    benefits, premium pay, promotions and other performance-based pay
    increases, and tenure-based career step increases. The latter
    three pay- related factors, offset to some extent by limited
    hiring at lower grade levels, pushed the average grade level, and
    hence pay, of federal employees higher during the downsizing
    period than they were before. Annual Pay Comparability
    The annual pay comparability adjustments were responsible for an
    Adjustments Were the Primary        estimated 58.9 percent, or
    $12.7 billion, of the estimated overall increase in Cause of
    Increased Payroll Costs federal payroll costs for a constant
    workforce of 1.9 million employees. This estimate includes the
    effect of comparability adjustments not only on the basic pay of
    federal employees, but also on the increased costs of certain
    federal pay and benefits, like retirement benefits, whose costs
    are set as a percentage of employees' basic pay. Increases in
    basic pay totaled about $10.1 billion due to annual comparability
    adjustments, and associated increases in premium pay and benefits
    added about $2.6 billion to this total. Overall, the comparability
    adjustments amounted to about a 17-percent increase in employees'
    pay and benefits. Comparability adjustments were approximately 19
    percent during the preceding 5-year period. Nonfederal employers
    increased their employees' pay and benefits approximately 16
    percent, as measured by the ECI, during the federal downsizing
    period. In most years before and during downsizing, the President
    and Congress acted to reduce the adjustments that otherwise would
    have been provided under the statutory pay formulas.  During the
    5-year period, for example, the combined nationwide and locality
    pay adjustments were about 9 percentage points less than the 24.5
    percent adjustment that was calculated, but not fully provided,
    under the pay formulas. Benefits Cost Increases             Some
    of the benefits that are calculated on the basis of employees'
    basic Accounted for Over 10 Percent       pay increased more than
    the amount that was due to basic pay increases. of the Payroll
    Cost Increase        In addition, other benefits, such as health
    insurance premiums, are not calculated on the basis of employees'
    basic pay, and some of these benefits increased in cost during
    fiscal years 1993 through 1997. In total, increases in the cost of
    benefits, exclusive of those attributable to increases in Page 9
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary employees' basic pay, accounted for an estimated
    13.6 percent, or $2.9 billion, of the overall increase in federal
    payroll costs. The average annual increase in benefit costs per
    employee during downsizing was about 29 percent less than the
    increase in benefit costs during the previous 5-year period.
    According to OPM officials, the primary reasons for the increases
    in benefit costs that did occur were agencies' costs for the
    buyouts offered to encourage employees to leave, matching
    contributions to the Thrift Savings Plan that agencies are
    required to make for the increasing number of employees' in the
    Federal Employees Retirement System (FERS), and the continuing
    increase in the cost of health insurance premiums of which
    agencies pay a portion. Premium Pay Increases Were        Premium
    pay, exclusive of the effect of comparability and other pay
    Minimal                           increases, increased during
    fiscal years 1993 through 1997, accounting for about 0.3 percent,
    or $0.1 billion, of the overall increase in federal payroll costs.
    This increase in the average amount of premium pay during
    downsizing was about 91 percent less than during the previous 5-
    year period. Agencies cited overtime payments as the primary
    reason for the premium pay increases. Pay Actions, Combined With
    Career step increases, promotions, performance pay, and the
    combined Changes in Workforce              effect of hiring and
    separation patterns together resulted in an overall Composition,
    Contributed to       payroll increase and an increase in the
    workforce's average grade. The Over One-Fourth of the Payroll
    combination of the pay actions and the hiring and separation
    patterns increased the average employee's payroll cost by about
    $3,180 and the Increase                          total workforce's
    payroll by about 29 percent, or $5.9 billion of the $21.6 billion
    increase for a constant workforce of 1.9 million employees during
    fiscal years 1993 through 1997. These changes in the
    characteristics of the workforce also resulted in an increase in
    the average grade level from GS- 9.1 to GS-9.5. This almost one-
    half grade increase was similar to the rate of increase during the
    previous 5-year period.4 The agencies' separation and hiring
    practices used during downsizing also contributed to 1.7 and 1.6
    year increases in employees' average age and service time,
    respectively, during downsizing. These rates of increase for
    average age and length of service were 55 and 100 percent greater,
    4 The average grade levels cannot be used to compute the dollar
    impact on the federal payroll because the composition of the
    average may vary depending on the step levels of the employees,
    and even higher grade and step levels do not necessarily equate to
    higher pay. For example, if an average grade of GS-9, step 1, was
    composed of a GS-8, step 8, and a GS-9, step 4, the average pay of
    the two employees would actually be much higher than GS-9, step 1,
    pay since both GS-8, step 8, and a GS-9, step 4, are paid at rates
    higher than GS-9, step 1. Page 10
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Executive Summary respectively, than the rates that occurred
    during the previous 5-year period. This aging of the workforce
    could pose problems if knowledgeable and experienced workers begin
    to retire in greater numbers. The administration's goal of
    increasing the ratio of staff to supervisors to 15 to 1 during
    downsizing was only partially met, as the ratio increased from 6.6
    to 7.7 employees per supervisor. Principally because most of the
    former supervisors remained with the government at the same grade
    and pay, the change in the supervisory ratio had little impact on
    the federal payroll. When federal agencies' allocate operating
    resources, the largest share Impact of Downsizing on    often is
    devoted to their workforces. Thus, agencies' effective management
    Human Capital              of their human capital is critical to
    both accomplishment of their missions and to efficient, effective,
    and economical agency operations. Agencies' ability to provide
    quality service while downsizing its human capital can be an
    extremely challenging effort without adequate planning. GAO
    reviews have found that a lack of adequate strategic and workforce
    planning during downsizing by some agencies may have affected
    their ability to provide quality service. Also, the use of
    agencywide hiring freezes made the replacement of employees with
    the types of skills needed to perform agencies' missions
    problematic. Some agencies acknowledged that the loss of critical
    employees could have been avoided had the agencies done meaningful
    planning and granted their buyouts consistent with those plans.
    Agencies have also reported that downsizing in general led to such
    negative effects as the loss of institutional memory and an
    increase in work backlogs. A more recent GAO study of six agencies
    found that most of these agencies had more effectively planned and
    implemented buyout programs after Congress began to require that
    strategic buyout plans be submitted to Congress. These agencies
    also had generally linked buyouts to achieving specific
    organizational objectives. These agencies were required by statute
    (P.L. 104-208) to submit these plans to the appropriate
    congressional appropriations and oversight committees prior to
    implementing their buyout authority. The plans were required to
    outline the intended use of the authority, including a description
    of how the agency would operate without the eliminated positions
    and functions. Recent and pending legislation to provide buyout
    authorities generally, but not always, require the agencies to
    prepare and submit strategic buyout plans for congressional review
    prior to implementing buyouts. Page 11              GAO/GGD-99-57
    Payroll and Human Capital Changes During Downsizing Executive
    Summary Strategic buyout plans are especially important given the
    general lack of attention to human capital issues in federal
    agencies' annual performance plans that are prepared under the
    Government Performance and Results Act of 1993. In this regard, we
    recently reported that most of the fiscal year 2000 annual
    performance plans do not sufficiently address how the agencies
    will use their human capital to achieve results.5 This general
    lack of attention to human capital issues is a very serious
    omission because only when the right employees are on board and
    provided the training, tools, structure, incentives, and
    accountability to work effectively is organizational success
    possible. Human capital issues will require continuing attention
    to minimize possible adverse effects on government performance. In
    this regard, GAO continues to believe that a strong link is needed
    between human capital planning and agencies' strategic and
    programmatic approaches to accomplishing their missions. To ensure
    the most cost-effective use of any future buyouts and to help
    Recommendations to    mitigate the adverse effects that can result
    from poorly planned Congress              downsizing, GAO
    recommends that Congress, in considering buyout legislation,
    continue to require agencies to prepare strategic buyout plans as
    a prerequisite for implementing buyout authority and to implement
    downsizing consistent with the results of their planning efforts.
    Similar to what was done for buyouts authorized by P.L. 104-208,
    Congress should also require agencies to submit their plans to
    appropriate congressional committees prior to implementing their
    buyout authority. DOD and OPM provided written comments on a draft
    of this report. Each Agency Comments       agency concurred with
    the report's findings. OPM's additional comments are included at
    the ends of chapters 2, 3, and 4. Subsequent to obtaining these
    agencies' comments, GAO revised the report to provide additional
    context on the impact of downsizing on human capital. Since
    comments had been previously requested from the appropriate
    agencies regarding the human capital issues discussed in its prior
    reports, GAO did not request additional comments. 5 Managing for
    Results: Opportunities for Continued Improvements in Agencies'
    Performance Plans (GAO/GGD/AIMD-99-215, July 20, 1999). Page 12
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Page 13    GAO/GGD-99-57 Payroll and Human Capital Changes During
    Downsizing Contents 4 Executive Summary 18 Chapter 1
    Origins of Federal Downsizing
    18 Introduction               Composition of the Federal Workforce
    19 Components of the Federal Payroll
    20 Employee Pay Adjustments
    20 Objectives, Scope, and Methodology
    22 27 Chapter 2                  Payroll Increases for Remaining
    Employees Were Larger                         29 Impact of
    Downsizing         Than Payroll Decreases Resulting From
    Downsizing Factors that Increased the Federal Payroll During
    30 on Federal Payroll and       Downsizing Human Capital
    Impact of Downsizing on Human Capital
    31 Conclusions
    32 Recommendations to Congress
    32 Agency Comments
    33 34 Chapter 3                  Annual Pay Comparability
    Adjustments Were the Major                           34 Annual Pay
    Cause of the Increases in Payroll Costs Benefits Cost Increases
    Accounted for Over 13 Percent of                      35
    Comparability                the Payroll Cost Increase Adjustments
    Were the Premium Pay Increases Were Minimal
    37 Agency Comments
    39 Primary Cause of Increased Payroll Costs 40 Chapter 4
    Impact of Career Steps, Promotions, and Performance
    40 Career Steps, Other          Pay Impact of Hiring and
    Separation Patterns                                      43 Pay
    Actions, and Workforce                  Decrease in Number of
    Supervisors and Managers Had                            47 Limited
    Payroll Impact Composition Changes Contributed About One-Fourth of
    the Payroll Increase Page 14         GAO/GGD-99-57 Payroll and
    Human Capital Changes During Downsizing Contents Agency Comments
    49 Appendix I: Comparison of Benefit Costs and Premium
    50 Appendixes      Pays per Employee for the 5-Year Periods Before
    and During Downsizing Appendix II: Comments From OPM
    52 Appendix III: Major Contributors to This Report
    53 Table 2.1: Factors Causing Increased Cost per Employee
    31 Tables          and Federal Payroll to Change, Fiscal Years
    1993 Through 1997 Table 3.1:  Changes in Cost of Benefits per
    Employee and                        36 Governmentwide During
    Downsizing Table 3.2:  Changes in Cost of Premium Pay per
    37 Employee and Governmentwide During Downsizing Table 4.1:
    Number and Amount of Personnel Actions
    41 Affecting Payroll During Downsizing Period Table 4.2:
    Proportion of Employees in, Separated From,
    46 and Newly Hired Into Occupational Categories During Downsizing
    Table 4.3: Effect of Acquiring and Separating or
    49 Reclassifying Supervisors and Managers Governmentwide During
    Downsizing Table I.1: Changes in Annual Average Cost of Benefits
    per                       50 Employee During Downsizing Due to
    Changes in Benefits and Comparability and Other Pay Actions Table
    I.2:  Changes in Annual Average Cost of Premium
    51 Pays per Employee During Downsizing Due to Changes in Premium
    Pays and Comparability and Other Pay Actions Figure 1: Percentage
    Effect of Various Factors                                   6
    Figures         Contributing to Federal Payroll Increase, Fiscal
    Years 1993-1997 Figure 2.1: Percentage Increase Contributed by
    Various                          28 Factors to Federal Payroll
    Costs, Fiscal Years 1993- 1997 Figure 2.2:  Actual Versus
    Projected Fiscal Year 1993-1997                      30 Changes in
    the Federal Payroll Amounts Figure 4.1:  Annualized Average Number
    of Career Step                           41 Increases, Promotions,
    and Performance Pay Increases per 1,000 Employees During
    Downsizing Compared With the 5-year Period Before Downsizing Page
    15           GAO/GGD-99-57 Payroll and Human Capital Changes
    During Downsizing Contents Figure 4.2:  Dollar Value of Career
    Step Increases,                              42 Promotions, and
    Performance Pay Increases per Pay Action During Downsizing
    Compared With the 5-year Period Before Downsizing Abbreviations
    COLA             cost of living adjustment CPDF
    Central Personnel Data File DOD              Department of Defense
    ECI              Employment Cost Index FAA              Federal
    Aviation Administration FEPCA            Federal Employees Pay
    Comparability Act of 1990 FERS             Federal Employees
    Retirement System FTE              full-time equivalent FWS
    Federal Wage System GS               General Schedule OPM
    Office of Personnel Management SSA              Social Security
    Administration Page 16            GAO/GGD-99-57 Payroll and Human
    Capital Changes During Downsizing Page 17    GAO/GGD-99-57 Payroll
    and Human Capital Changes During Downsizing Chapter 1 Introduction
    Since 1991, Congress and the Bush and Clinton administrations have
    been reducing federal employment levels as a means of reducing
    federal costs and controlling deficits. For much of the period
    since January 1, 1993, Department of Defense (DOD), and since
    March 30, 1994, non-DOD, agencies have been paying separation
    incentives-commonly known as buyouts-to induce employees to
    voluntarily leave federal service. However, the federal payroll
    increased by $8.7 billion, or 9.3 percent, from $93.7 billion to
    $102.4 billion, while the federal civilian workforce was reduced
    by about 297,000 employees, or 13.8 percent, to 1.9 million
    employees during fiscal years 1993 through 1997. To determine why,
    we identified and analyzed the major factors that resulted in an
    increased federal payroll at the end of this period of downsizing.
    We also summarized our prior studies on the impact of downsizing
    on human capital. The administration and Congress began to reduce
    the number of Origins of Federal    employees in DOD agencies in
    1991-primarily through military base Downsizing
    closings-to reduce the federal payroll. Beginning in 1993,
    Congress and the administration, through a series of legislative
    acts and executive orders, established authorities and goals for
    reducing federal staffing levels governmentwide. In this regard,
    three key pieces of legislation were the National Defense
    Authorization Act for Fiscal Year 1993; the Federal Workforce
    Restructuring Act of 1994; and section 663 of the Treasury, Postal
    Service, and General Government Appropriations Act of 1997, each
    of which authorized agencies to pay separation incentives-commonly
    known as buyouts-of as much as $25,000 to eligible employees as
    inducements to leave federal service voluntarily. Buyouts provided
    agencies a tool to avoid or reduce the need for reductions-in-
    force. The National Defense Authorization Act authorized buyouts
    for civilian employees at DOD agencies from January 1, 1993,
    through September 30, 1997. This closing date was later extended
    to September 30, 1999.1 The Federal Workforce Restructuring Act of
    1994, in addition to authorizing buyouts, mandated governmentwide
    reductions of 272,900 full-time equivalent (FTE) positions through
    fiscal year 1999.2 The Workforce Restructuring Act generally gave
    non-DOD agencies authority to offer buyouts from March 30, 1994,
    through March 31, 1995. The 1997 1P.L. 102-484 authorized DOD
    buyouts through September 30, 1997; P.L. 103-337 extended DOD
    buyouts through September 30, 1999. 2According to OMB guidance, an
    FTE or work year generally consists of one or more employed
    individuals who collectively complete 2,080 work hours in a given
    year. Therefore, either one full-time employee or two half-time
    employees equal one FTE or work year. These hours include
    straight-time hours only and exclude overtime and holiday hours.
    Page 18                            GAO/GGD-99-57 Payroll and Human
    Capital Changes During Downsizing Chapter 1 Introduction
    appropriations act gave most non-DOD agencies the authority to
    offer buyouts from October 1, 1996, through December 30, 1997.
    More recent legislation has extended the authority for offering
    buyouts for DOD agencies to September 30, 2001, and for some non-
    DOD agencies until September 30, 1999, with some specific
    agencies, such as the Internal Revenue Service, having authority
    until as late as January 1, 2003. The federal workforce was
    composed of about 1.9 million FTE non-postal Composition of the
    employees at the end of fiscal year 1997. Most "white-collar"
    workers, Federal Workforce       about 1.6 million, are covered
    for pay and classification purposes by the General Schedule (GS),
    which consists of 15 grades, each broadly defined in law in terms
    of difficulty and responsibility of the work and the
    qualifications required for its performance. Other white-collar
    employees not covered under the GS system include the Foreign
    Service, certain Veterans Health Administration medical personnel,
    and the Senior Executive Service, which includes most employees
    above the GS-15 level. The Office of Personnel Management (OPM)
    categorizes each white-collar occupation on the basis of the
    general subject matter of work, level of difficulty or
    responsibility, and educational requirements. A description of the
    five categories follows. *  Professional occupations require
    incumbents to use discretion and judgment in applying knowledge
    acquired through education or training equivalent to a bachelor's
    degree in a specialized field. Professional occupations include
    statistician, accountant, and architect. *  Administrative
    occupations involve the exercise of analytical ability, judgment,
    and the application of a substantial body of knowledge of
    administrative or management principles and practices. While these
    occupations do not require specialized educational majors, they do
    involve the type of skills typically gained through a general
    college education or progressively responsible work. These
    occupations include air traffic controller, criminal investigator,
    and financial analyst. *  Technical occupations consist of
    nonroutine work that is learned on-the- job or from specialized
    training less than that represented by college graduation, to
    support professional or administrative fields. Technical
    occupations include practical nurse, economics assistant, and
    engineering technician. *  Clerical occupations require incumbents
    to do structured work according to established policies, which are
    learned through training or work experience, to support office
    operations. Clerical occupations include secretary, clerk-typist,
    and customs aide. Page 19          GAO/GGD-99-57 Payroll and Human
    Capital Changes During Downsizing Chapter 1 Introduction *  Other
    white-collar occupations include those miscellaneous occupations
    that are not included in one of the four other categories. Other
    white-collar occupations include corrections officers and police.
    Professional and administrative occupations generally have higher
    entry levels and average grade levels than do clerical
    occupations. As of September 30, 1997, federal blue-collar
    employees numbered about 250,000. They are covered by the Federal
    Wage System (FWS), the major pay system covering trade, craft, and
    labor occupations. These occupations include machine tool work,
    printing, and plumbing and pipefitting. Wage schedules consist of
    15 grades, covering most nonsupervisory employees. Schedules for
    supervisors and leaders are based on the nonsupervisory schedules,
    but are separate from them. The federal payroll has three primary
    components-basic pay, premium Components of the      pay, and the
    cost of benefits provided to the employees. Basic pay consists
    Federal Payroll        of the salaries and wages paid directly to
    employees for duties performed during the employees' regular
    workweek. Basic pay also includes amounts paid for annual and sick
    leave. Premium pay is supplemental pay, such as overtime, for work
    in excess of the regular workweek, which is generally an 8-hour
    day and a 5-day week that does not include Sunday. Benefits
    provided to employees at a cost to the government include
    agencies' shares of health and life insurance premiums and
    retirement contributions. The benefits cost category also includes
    severance pay or buyout payments made to employees leaving the
    federal government. Most federal employees receive annual pay
    comparability adjustments Employee Pay           under the Federal
    Employees Pay Comparability Act of 1990 (FEPCA). Adjustments
    FEPCA introduced a new annual pay-setting process that, beginning
    in 1994, was to gradually raise federal pay rates to within 5
    percent of nonfederal rates by the year 2002. Annual pay
    comparability adjustments consist of two components: a single
    nationwide basic pay schedule percentage adjustment and varying
    adjustments in specific localities. The nationwide adjustment is
    based on the Employment Cost Index (ECI), an index prepared by the
    Bureau of Labor Statistics that measures the change in nonfederal
    employers' wages and salaries. The ECI adjustment generally
    applies to GS-that is, most- federal employees; Foreign Service
    pay schedules; and pay schedules established under title 38 for
    certain Veterans Health Administration employees. It may also be
    applied to other pay systems, such as the Senior Executive
    Service. The locality pay adjustments apply to specific Page 20
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 1 Introduction geographical areas within the continental
    United States in which surveyed nonfederal pay rates exceed GS pay
    rates by 5 percent. As with the ECI adjustment, the locality pay
    adjustment may also be applied to other pay systems up to
    established statutory pay ceilings. The locality and nationwide
    pay comparability adjustments were intended to deal with the pay
    gap as well as any annual increases in nonfederal pay rates. At
    the time of enactment, the estimated pay gap was about 28 percent,
    and FEPCA required that 20 percent of the gap be closed in 1994,
    with locality pay adjustments each year thereafter until the pay
    gap was reduced to 5 percent.3 FEPCA also authorizes the President
    to propose lower alternative pay comparability adjustments under
    certain specified conditions. Since 1994, either the adjustment
    based on the ECI or the locality pay surveys have been limited by
    alternative adjustments by the President and Congress. Employees'
    pay also varies at a given grade level, depending on which of 10
    steps the employee occupies within that grade. Each higher step
    increases the employee's rate of basic pay within that grade.
    Employees' advancement to the next step within a grade (career
    step increases) is to be based on performance at an acceptable
    level of competence and established waiting periods for the steps.
    The waiting periods for steps 1 through 4, 5 through 7, and 8
    through 10 are 52, 104, and 156 weeks, respectively.  Employees
    demonstrating "high quality performance" may advance more rapidly
    through the steps by being granted additional performance-based
    step increases (quality step increases). An employee may receive
    only one such increase during any 52-week period. Pay under FWS is
    to be based on what private industry is paying for the same kind
    of work in local wage areas. Federal blue-collar employees are to
    be paid the full prevailing rate at step 2 of their grade. At step
    5, the highest step, they may be paid 12 percent above the
    prevailing rate. Since fiscal year 1979, separate legislation has
    limited or delayed annual FWS wage adjustments. Blue-collar
    employees also receive career step increases and, based on
    creditable service, may advance to step 5 in about 6 years.
    However, there are no provisions for their receiving quality step
    increases. 3Prior to FEPCA, employees' pay was adjusted annually
    in accordance with the Federal Pay Comparability Act of 1970. The
    1970 Act also had the principle of pay comparability, requiring
    annual adjustments to make federal pay rates comparable with
    private sector pay rates for the same levels of work. Page 21
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 1 Introduction The Chairmen of the Senate Committee on
    Governmental Affairs and its Objectives, Scope, and Subcommittee
    on International Security, Proliferation and Federal Methodology
    Services asked us to analyze changes in the federal workforce's
    pay and composition since passage of the National Defense
    Authorization Act for Fiscal Year 1993 and the Federal Workforce
    Restructuring Act of 1994, to determine why the federal payroll
    increased while the number of federal employees was decreasing.
    Our specific objectives were to determine *  to what extent and
    for what reasons the amounts of basic pay, costs of benefits, and
    premium pay changed during downsizing, and *  how, and to the
    extent possible why, grade and pay levels, the proportion of
    employees in occupations, and other demographics of the workforce
    changed in DOD and non-DOD agencies during downsizing and what
    impact these changes had on the federal payroll. We also answered
    the question of to what extent the number and salaries of
    supervisors and managers and their ratio to employees changed
    during downsizing and how those changes affected the payroll. In
    addition, we summarized our prior findings on human capital issues
    related to downsizing. To determine the extent to which and for
    what reasons basic pay, benefits costs, and premium pay changed
    during downsizing, we identified the factors that affected these
    payroll costs-annual comparability adjustments, changes in the
    grades and pay levels of federal employees, and changes in
    agencies' use of benefits and premium pay. We obtained data on pay
    comparability adjustments from reports prepared by the President's
    Pay Agent4 and OPM's annual reports entitled Pay Structure of the
    Federal Civil Service. We obtained data on the number of
    employees, basic pay, benefits costs, and premium pay and the
    average grade of full- time federal employees from OPM's annual
    reports entitled Work Years and Personnel Costs and The Fact Book:
    Federal Civilian Workforce Statistics. We used the difference
    between the average payroll cost per employee for the 2.2 million
    employees at the beginning of fiscal year 1993 and for the 1.9
    million employees at the end of fiscal year 1997 to approximate a
    $21.6 billion payroll increase for a constant workforce of 1.9
    million employees. We did not have the data necessary to determine
    the exact payroll cost for 4The President's Pay Agent is composed
    of the Secretary of Labor and the Directors of OPM and the Office
    of Management and Budget. Page 22
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 1 Introduction the employees who separated during fiscal
    years 1993 through 1997. However, we were able to determine that
    the average payroll cost per employee for the 2.2 million
    employees included subsequently separated employees, who had lower
    average payroll costs than the remaining employees. We calculated
    the impact of annual comparability adjustments on the basic pay
    portion of the federal payroll and on the average employee's basic
    pay during fiscal years 1988 through 1997. We used a single
    average for each of the years to represent the nationwide and
    locality pay adjustments. To facilitate our analysis, we applied
    these increases to the entire payroll for all federal civilian
    employees, including blue-collar employees, who received pay
    adjustments under another system.5 After determining the amount
    that basic pay increased as a result of annual comparability
    adjustments, we calculated the amounts that basic pay increased
    each year due to other pay actions and separation and hiring
    trends that resulted in changes in employees' grade and pay
    levels. We then determined the proportionate relationship each
    year between the impact on basic pay of comparability adjustments
    and the impact on basic pay of other pay actions and of separation
    and hiring trends. To calculate the effect comparability
    adjustments and other pay actions had on the costs of benefits and
    premium pay, we analyzed the extent to which the cost of each
    benefit and premium pay changed during fiscal years 1988 through
    1997 due to basic pay increases--as distinct from changes in usage
    of the benefits and premium pays, which may also increase their
    costs. Since most benefits and premium pays are based on
    employees' basic pay, we calculated the proportions of the costs
    of benefits and premium pays that increased annually due to pay
    comparability adjustments. We then used these proportionate cost
    increases due to comparability adjustments, and the proportionate
    relationship of comparability adjustments to grade and pay level
    changes, to calculate the increases in the costs of benefits and
    premium pay due to grade and pay level changes. One exception was
    that we did not attribute any increases in the government's share
    of health insurance premiums to pay comparability adjustments or
    other pay actions, since health insurance premiums are not based
    on employees' pay. We considered the changes in costs of benefits
    and premium pay to be the difference between the amounts due to
    comparability adjustments and grade and pay changes and the total
    changes in the annual costs of benefits and premium pays. 5Blue-
    collar employees are covered by a different pay system; however,
    their annual pay adjustments have been similar to those received
    by white-collar employees. Page 23
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 1 Introduction Our calculations of the impact of
    comparability and other pay increases do not provide an exact
    amount but rather an estimate, because the government's costs for
    some benefits and premium pay, such as overtime, are also affected
    by other factors, such as a cap on the amounts that can be paid.
    In addition, per employee costs were calculated on the basis of
    all employees because data were not readily available on the
    specific number of employees who received each type of benefit or
    premium pay. Further, although temporary employees generally do
    not receive benefits, we did not determine and adjust for the
    number of such temporary employees in our calculations. Temporary
    employees comprised about 10 percent of the federal civilian
    workforce in fiscal year 1997. We totaled the change due to usage
    in the costs of various benefits and premium pays to determine
    whether, in aggregate, the annual costs of benefits and premium
    pays increased during the downsizing period and thus contributed
    to an increase in the federal payroll.6 In addition, we determined
    the extent to which the costs of benefits and premium pays due to
    usage increased or decreased during fiscal years 1993 through
    1997. To determine how, and to the extent possible why, the
    proportion of employees in occupations and grade and pay levels
    changed governmentwide, as well as in DOD and non-DOD agencies, we
    used OPM's Central Personnel Data File (CPDF) to analyze data on
    the numbers of employees in occupations and general occupational
    categories in each agency and governmentwide.7 We calculated the
    extent to which the percentage of employees in occupations with
    500 or more employees, and in general occupational categories,
    changed in proportion to the federal workforce between October 1,
    1987, and December 31, 1992, compared with the period January 1,
    1993, to March 31, 1998. We also did the same analysis for the
    periods from October 1, 1987, through March 31, 1994, and April 1,
    1994, through March 31, 1998, for non-DOD agencies. We ranked the
    five agencies with the highest increases and decreases in
    individual occupations and in each general occupational category.
    We then selected eight agencies that were among those ranked
    highest in a number of these categories and that also had payrolls
    that represented over 3 percent of the total federal payroll. Two
    agencies with smaller payrolls-the Federal Emergency Management
    Agency and the Department of Housing and 6The entire amount of
    annual changes in the cost of health insurance premiums was
    included in the total amount of benefit costs attributed to usage.
    7The CPDF contains computerized records of most federal civilian
    employees, including employees' grade levels and pay, as well as
    their personnel actions, such as promotions and performance pay
    increases. These records are maintained and updated quarterly by
    OPM from data provided by federal agencies. Page 24
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 1 Introduction Urban Development-were selected because
    they had the highest number of changes in several occupations and
    occupational groups. We interviewed officials at these 10 agencies
    to determine reasons why the changes had occurred. To determine
    how and why employees' grade and pay levels changed and the impact
    of those changes, we identified the primary factors that increased
    employees' pay. We obtained and analyzed CPDF data on the types of
    pay actions and determined that career steps, promotions, and
    performance pay increases together played the largest part in
    increasing employees' pay. We analyzed the CPDF data to determine
    the total number and amounts of these actions for the two 5-year
    periods and adjusted the amounts to exclude the sums attributable
    to annual pay comparability adjustments. We had previously
    estimated the effect of comparability adjustments on the costs of
    benefits and premium pay. We used these estimates and assumed that
    the pay actions' impact was in the same proportional relationship
    to the comparability pay adjustments' effect on the costs of
    benefits and premium pay as was the proportional relationship of
    comparability and pay actions for basic pay. To determine the
    impact of separation and hiring patterns on the average grade
    levels, we also analyzed the CPDF database to determine the
    average grade for employees who were separated from, were hired
    into, and who remained in the government in fiscal years 1988
    through 1997. To determine whether the average grade increased at
    a different rate during downsizing than before downsizing, we
    calculated the difference in employees' average grade for the
    periods before downsizing-fiscal years 1988 through 1992-and
    during downsizing-fiscal years 1993 through 1997. We recognize
    that some of the change in the average grade and pay would occur
    as a result of downsizing if the distribution of separated
    employees were uneven across federal grade levels. To determine
    the extent to which the number and salaries of supervisors and
    managers, and their span-of-control, changed, and the effect of
    such changes on the federal payroll, we analyzed the CPDF data on
    GS and blue collar employees to identify the number of supervisors
    and managers, and their ratio to staff, on September 30, 1987;
    September 30, 1992; and September 30, 1997, for all agencies
    governmentwide.8 For fiscal years 1993 through 1997, we also
    determined whether employees who had been 8We excluded blue collar
    employees in calculating the number of employees in grades GS-12
    through GS-15 on September 30, 1992, and September 30, 1997,
    because blue collar employees do not have GS grades. Page 25
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 1 Introduction identified as supervisors or managers after
    downsizing began, but were no longer identified as supervisors or
    managers at subsequent dates, had a code indicating the reason for
    the change, such as reclassification or transfer to another
    position. For these former supervisors and managers, we reviewed
    their salaries to determine the amount of any salary change at the
    time they changed to nonsupervisory or nonmanagement positions.
    For employees who became supervisors or managers, and for
    supervisors and managers who left the federal government during
    downsizing, we determined the amount of their salaries at those
    times. Our estimate of the total pay of new supervisors and
    managers assumed that 86 percent of those who were not hired from
    outside government were either replaced in their previous
    nonsupervisory positions by new hires or that, somewhere in the
    line of succession caused by the vacancy in their former position,
    an employee from outside government was hired. We assumed that 14
    percent of the vacated positions were not filled, to reflect the
    overall 14 percent staffing reduction during downsizing. We could
    not verify our assumptions because the CPDF does not have
    information on whether newly appointed supervisors or managers or
    other employees were replaced in their former positions by new
    hires or existing employees. To provide contextual information on
    the impact of downsizing on human capital, we reviewed and
    summarized the relevant portions of our prior reports. These
    reports, issued during fiscal years 1996 through 1999, are cited
    where the relevant discussion occurs in chapter 2. We did our
    audit work in Washington, D.C., from September 1998 through July
    1999 in accordance with generally accepted government auditing
    standards. We requested comments on a draft of this report from
    the Director of OPM and the Secretary of DOD or their designees.
    OPM and DOD provided written comments.  OPM's additional comments
    are presented at the ends of chapters 2, 3, and 4, and are
    reprinted in appendix II. OPM and DOD also provided technical
    comments, which we incorporated in the report where appropriate.
    Subsequent to obtaining these agencies' comments, we revised the
    report to provide additional context on the impact of downsizing
    on human capital. Since comments had been previously requested
    from the appropriate agencies regarding the human capital issues
    discussed in our prior reports, we did not request additional
    comments. Page 26          GAO/GGD-99-57 Payroll and Human Capital
    Changes During Downsizing Chapter 2 Impact of Downsizing on
    Federal Payroll and Human Capital Between the beginning of fiscal
    year 1993 and the end of fiscal year 1997, the total federal
    payroll cost grew by $8.7 billion to $102.4 billion, even though
    the number of employees decreased by about 300,000, because the
    payroll cost reductions attributable to the employees who left
    were less than the increased payroll costs for those employees who
    remained with the federal government. In terms of 1997 constant
    dollars, however, the payroll declined by $2.4 billion during the
    5-year downsizing period. Based on the change in the average cost
    per employee during fiscal years 1993 through 1997, the payroll
    cost could have been about $16.4 billion, or 16 percent, higher
    had there been no employee reductions. This estimate, however,
    does not consider costs resulting from downsizing, such as the
    cost of an increased number of separation payments and the use of
    contractors to provide services previously provided by downsized
    employees. Because the $8.7 billion increase was based on 2.2
    million employees in 1993 and 1.9 million employees in 1997, we
    recalculated the payroll increase of about $11,600 per employee as
    it related to only 1.9 million employees so that we could isolate
    the factors contributing to the increase. We developed a payroll-
    increase approximation of about $21.6 billion.1  For comparison,
    in terms of 1997 constant dollars, the payroll increase was
    approximately $6,460 per employee and $12.0 billion for 1.9
    million employees. The increased payroll costs for those employed
    by the federal government were attributable to several causes, but
    the predominant cause was the annual, statutorily-based pay
    adjustment meant to make federal pay competitive with that of
    nonfederal employers. Other factors that directly increased the
    compensation of federal employees were increases in the cost of
    employee benefits and a small increase in the amount of premium
    pays that employees earned. These factors are discussed in more
    detail in chapter 3. Certain changes in the characteristics of the
    federal workforce also increased the overall federal payroll cost.
    However, while career steps, promotions, and performance pay
    increased the overall grade and payroll cost averages
    governmentwide, hiring and separation patterns had the combined
    effect of lessening the 1 We did not have the data necessary to
    determine the exact payroll costs for the 1.9 million employees or
    for the net reduction of 300,000 employees during fiscal years
    1993 through 1997. Therefore, we used the difference between the
    average payroll cost per employee for 2.2 million employees in
    1993 and 1.9 million employees in 1997 to approximate a $21.6
    billion payroll increase for a constant workforce of 1.9 million
    employees. Page 27                            GAO/GGD-99-57
    Payroll and Human Capital Changes During Downsizing Chapter 2
    Impact of Downsizing on Federal Payroll and Human Capital growth
    in the governmentwide average grade and payroll cost. These
    factors are discussed in more detail in chapter 4. Figure 2.1
    shows the percentage each of these factors contributed to the
    increase in payroll costs for those employed in 1997. The factors
    that affected the federal payroll but not the characteristics of
    the workforce are unshaded, while the factors that affected both
    the payroll and the characteristics of the workforce are shaded.
    Figure 2.1: Percentage Increase Contributed by Various Factors to
    Federal Payroll Costs, Fiscal Years 1993-1997 Source: GAO
    calculations based on OPM data. While our primary objective was to
    identify and analyze reasons for the payroll increase, another was
    to summarize our past findings on human capital issues related to
    downsizing. Our previous reviews of downsizing found that a lack
    of adequate strategic and workforce planning by some agencies may
    have affected their ability to achieve organizational missions
    with a reduced workforce. In a subsequent study of six agencies'
    experiences in the later stages of their downsizing efforts, we
    found that Page 28             GAO/GGD-99-57 Payroll and Human
    Capital Changes During Downsizing Chapter 2 Impact of Downsizing
    on Federal Payroll and Human Capital most of these agencies had
    more effectively planned and implemented buyout programs and had
    generally linked buyouts to achieving specific organizational
    objectives. These latter agencies were required to submit
    strategic buyout plans to Congress prior to implementing buyouts.
    The actual payroll at the beginning of fiscal year 1993 was $93.7
    billion, Payroll Increases for           and it increased by $8.7
    billion to $102.4 billion as of September 30,1997, Remaining
    Employees the end of that fiscal year. During that same time
    period, federal employment was reduced from 2.2 million employees
    to about 1.9 million. Were Larger Than                The net
    increase of $8.7 billion in the payroll occurred because
    employees' Payroll Decreases               payroll costs increased
    in excess of the payroll cost reductions resulting Resulting From
    from the separation of about 300,000 employees during the period.
    In Downsizing                      terms of 1997 constant dollars,
    however, the payroll declined by $2.4 billion during the 5-year
    downsizing period. At the same time, the average payroll cost per
    employee increased in nominal dollars by $11,600, from about
    $43,400 to $55,000, and by approximately $21.6 billion for a
    constant workforce of 1.9 million employees. For comparison, this
    increase in terms of 1997 constant dollars was about $6,460 per
    employee and about $12.0 billion for 1.9 million employees.  Had
    the number of employees remained at 2.2 million, and had the
    average cost of pay and benefits per employee still increased by
    $11,600, the federal payroll would have increased from $93.7
    billion to $118.8 billion in fiscal year 1997. Although the
    federal payroll is less than it would have been without
    downsizing, it nevertheless increased in relation to what it would
    have been had it been held constant since the beginning of fiscal
    year 1993. In effect, the retrospective 1993 payroll for the 1.9
    million employees on the rolls as of September 30, 1997, was an
    estimated $80.8 billion, and it increased by approximately $21.6
    billion to $102.4 billion based on the $11,600 increase in the
    average cost of pay and benefits per employee. Figure 2.2 presents
    the actual and projected federal payrolls for fiscal years 1993
    through 1997 for the scenarios discussed in the preceding
    paragraph. The figure shows the projected federal payrolls if the
    number of employees had remained at 2.2 million during downsizing
    while the average pay per employee increased annually at the rate
    experienced during downsizing, as well as showing the actual
    federal payrolls during downsizing. Page 29            GAO/GGD-99-
    57 Payroll and Human Capital Changes During Downsizing Chapter 2
    Impact of Downsizing on Federal Payroll and Human Capital Figure
    2.2:  Actual Versus Projected Fiscal Year 1993-1997 Changes in the
    Federal Payroll Amounts Source: GAO calculations based on OPM
    data. The difference of approximately 16 percent between the
    projected federal payroll if 2.2 million employees had remained in
    the federal government and the actual payroll in fiscal year 1997
    does not accurately represent the amount saved by downsizing. This
    estimate does not consider the costs resulting from downsizing,
    such as the cost of an increased number of separation payments and
    the use of contractors to provide services previously provided by
    downsized employees. In a previous report, we noted that 5 of 24
    agencies reviewed acknowledged contracting out some work, formerly
    done by federal employees who had taken buyouts, to compensate for
    having a smaller workforce.2 Table 2.1 shows the factors and the
    extent to which each contributed to Factors that Increased the
    changes in employees' average pay and benefits and to total
    federal the Federal Payroll                     payroll costs.
    These factors are discussed in more detail in chapters 3 and 4.
    During Downsizing 2 Federal Downsizing: Better Workforce and
    Strategic Planning Could Have Made Buyouts More Effective
    (GAO/GGD-96-62, Aug. 26, 1996). Page 30
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 2 Impact of Downsizing on Federal Payroll and Human
    Capital Table 2.1: Factors Causing Increased Cost per Employee and
    Federal Payroll to Change, Fiscal Years 1993 Through 1997
    Employee's                   Impact on federal payroll (in
    Percentage of increase caused Status/change factor
    average pay
    billions)                                                   by
    factor Fiscal year 1993
    $43,400 Increase due to annual pay comparability adjustmentsa
    6,840                                                      $12.7
    58.9 Increases in employees' benefitsa
    1,580                                                          2.9
    13.6 Increases in employees' premium paya
    30                                                        0.1
    0.3 Increases due to career steps, promotions, performance pay
    increases, and the combination of hiring and separation patternsb
    3,180                                                          5.9
    27.3 Fiscal year 1997c
    $55,000d
    $21.6                                                       100.0d
    aAddressed in chapter 3. bAddressed in chapter 4. cEmployees'
    average pay and the extent to which the factors increased the
    federal payroll as of fiscal year 1997. dNumbers do not total due
    to rounding. Source: GAO calculations based on OPM data. When
    federal agencies allocate operating resources, the largest share
    often Impact of Downsizing                          is devoted to
    their workforces, that is, human capital. Thus, effectively on
    Human Capital                              managing their human
    capital is critical to both effective accomplishment of agencies'
    missions and to efficient, effective, and economical operations.
    Providing quality service while agencies downsize their human
    capital can be extremely challenging without adequate planning.
    Our reviews have found that a lack of adequate strategic and
    workforce planning during downsizing by some agencies may have
    affected their ability to provide quality service.3 Also, the use
    of agencywide hiring freezes made the replacement of employees
    with the types of skills needed to perform agencies' missions
    problematic. Some agencies acknowledged that the loss of critical
    employees could have been avoided had the agencies done meaningful
    planning and granted their buyouts consistent with those plans.
    Agencies have also reported that downsizing in general had
    negative effects. For example, 11 or more of 24 agencies in the
    1996 review cited a loss of institutional memory, an increase in
    work backlogs, or a somewhat of a or great hindrance in performing
    their mission. In a subsequent study of six agencies' experiences
    in the later stages of their downsizing efforts, we found that
    most of these agencies had more effectively planned and
    implemented buyout programs and had generally 3 Federal
    Downsizing: Better Workforce and Strategic Planning Could Have
    Made Buyouts More Effective (GAO/GGD-96-62, Aug.  26, 1996) and
    Federal Downsizing: Buyouts at the Farm Service Agency (GAO/GGD-
    97-133, July 23, 1997). Page 31
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 2 Impact of Downsizing on Federal Payroll and Human
    Capital linked buyouts to achieving specific organizational
    objectives.4  This increase in buyout program effectiveness was
    due in part to a statutory requirement (P.L. 104-208) that
    directed agencies to submit strategic buyout plans to the
    appropriate congressional appropriation and oversight committees
    prior to implementing buyout authority. The plans were required to
    contain an outline of the intended use of the authority, including
    such information as the number and amounts of buyouts to be
    offered, the positions and functions to be reduced or eliminated,
    and a description of how the agency would operate without the
    eliminated positions and functions. Recent and pending legislation
    to provide buyout authorities generally, but not always, require
    the agencies to submit similar plans prior to or after
    implementation of the buyout program. Strategic buyout plans are
    especially important given the general lack of attention to human
    capital issues in federal agencies' annual performance plans that
    were prepared under the Government Performance and Results Act of
    1993. In this regard, we recently reported that most of the fiscal
    year 2000 annual performance plans do not sufficiently address how
    the agencies will use their human capital to achieve results.5
    Specifically, few of the plans relate how the agency will build,
    marshal, and maintain the human capital needed to achieve its
    performance goals. This general lack of attention to human capital
    issues is a serious omission because only when the right employees
    are on board and provided the training, tools, structure,
    incentives, and accountability to work effectively is
    organizational success possible. Improved planning by some
    agencies during the more recent downsizing Conclusions
    period should help to minimize those agencies' future problems.
    Problems such as skills imbalances and work backlogs, however, may
    take some time to resolve. When human capital planning is linked
    to agencies' strategic planning, problems such as skills
    imbalances are more easily avoided. Thus, we continue to believe
    that a strong link is needed between human capital planning and
    agencies' strategic and programmatic approaches to accomplishing
    their missions. To ensure the most cost-effective use of any
    future buyouts and to help Recommendations to    mitigate the
    adverse effects that can result from poorly planned Congress
    downsizing, we recommend that Congress, in considering buyout 4
    Federal Downsizing: Effective Buyout Practices and Their Use in FY
    1997 (GAO/GGD-97-124, June 30, 1997). 5 Managing for Results:
    Opportunities for Continued Improvements in Agencies' Performance
    Plans (GAO/GGD/AIMD-99-215, July 20, 1999). Page 32
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 2 Impact of Downsizing on Federal Payroll and Human
    Capital legislation, continue to require agencies to prepare
    strategic buyout plans as a prerequisite for implementing buyout
    authority and to implement downsizing consistent with the results
    of their planning efforts. Similar to what was done for buyouts
    authorized by P.L. 104-208, Congress should also require agencies
    to submit their plans to appropriate congressional committees
    prior to implementing their buyout authority. DOD and OPM
    concurred with our findings.  OPM agreed that much of the Agency
    Comments    increase in payroll cost during downsizing was due to
    pay raises, with smaller increases due to changes in the
    workforce's composition and in benefits costs. OPM also said that
    it believes the report reflects the success of the
    administration's efforts to slow the rate of growth in federal
    employment and payroll costs, noting that the growth would have
    been much greater had the federal workforce not been reduced by
    about 300,000 employees during the period we reviewed.  We agree
    that the federal payroll could have been larger in the absence of
    downsizing and recognize the importance of the administration's
    role in downsizing the government.  However, as noted in chapter
    1, both Congress and the administration played roles in the
    downsizing effort. Subsequent to obtaining the agencies' comments,
    we revised the report to provide additional context on the impact
    of downsizing on human capital. Since comments had been previously
    requested from the appropriate agencies regarding the human
    capital issues discussed in our prior reports, we did not request
    additional comments. Page 33            GAO/GGD-99-57 Payroll and
    Human Capital Changes During Downsizing Chapter 3 Annual Pay
    Comparability Adjustments Were the Primary Cause of Increased
    Payroll Costs The increased payroll costs for the 1.9 million
    federal employees in fiscal year 1997 were due primarily to
    employees' annual pay comparability adjustments. The annual pay
    comparability adjustments were responsible for an estimated 59
    percent of the overall increase in federal payroll costs. This
    estimate includes the effect of comparability adjustments not only
    on the basic pay of federal employees, but also on the costs of
    other types of pay and employee benefits, such as premium pay, the
    costs of which are based on percentages of employees' basic pay.
    Basic federal pay rose about $5,440 per employee due to annual
    comparability increases during fiscal years 1993 through 1997, and
    associated pay and benefits increased about $1,400 per employee.
    These pay comparability adjustments were comparable to the
    increases provided to nonfederal employees during the same period,
    as measured by the ECI. Some of the benefits that are calculated
    on the basis of employees' basic pay increased by more than the
    amounts that were due to basic pay increases. In addition, some
    benefits costs, such as health insurance premiums, that are not
    calculated on the basis of employees' basic pay also increased
    during fiscal years 1993 through 1997. In total, increases in the
    cost of benefits, exclusive of the increases directly attributable
    to increases in employees' basic pay, accounted for an estimated
    13.6 percent, or $1,580 per employee, of the overall increase in
    the average payroll cost per employee. Premium pay, exclusive of
    the effect of comparability and other pay increases, also
    increased in cost during fiscal years 1993 through 1997. This
    accounted for about 0.3 percent, or $30, of the overall $11,600
    increase in federal payroll costs per employee. During fiscal
    years 1993 through 1997, comparability adjustments Annual Pay
    increased the average payroll cost per employee by about $6,800,
    or an Comparability           estimated $12.7 billion for the 1.9
    million employees. These pay adjustments affected not only
    employees' basic pay, but also the amounts Adjustments Were the
    of premium pay and the cost of benefits provided by the
    government, since Major Cause of the      most of these costs are
    based on percentages of an employee's basic pay. Increases in
    Payroll    Thus, the pay comparability adjustments resulted in
    increases in the Costs                   average employee's basic
    pay, benefits, and premium pay of about $5,400, $1,020, and $380,
    respectively. The comparability adjustments increased pay and
    benefits by about 17 percent, which was somewhat less than the
    approximately 19-percent increase resulting from such adjustments
    during the preceding 5-year period. Page 34          GAO/GGD-99-57
    Payroll and Human Capital Changes During Downsizing Chapter 3
    Annual Pay Comparability Adjustments Were the Primary Cause of
    Increased Payroll Costs Annual pay comparability adjustments are
    intended to make federal pay competitive with that of alternative
    employers so that the federal government can attract and retain
    employees. During this period, comparability adjustments to
    employees' basic pay totaled about 17 percent. This was comparable
    to the 16-percent increase provided by nonfederal employers, as
    measured by the ECI. In most years before and during downsizing,
    however, the President and Congress acted to reduce the
    adjustments that otherwise would have been provided under the
    statutory pay formulas.  During the 5-year period, for example,
    the combined nationwide and locality pay adjustments were about 9
    percentage points less than the 24.5 percent adjustment that was
    calculated but not provided under the pay formulas. During fiscal
    years 1993 through 1997, the cost of benefits, exclusive of the
    Benefits Cost                    effect attributable to
    comparability and other pay increases, increased by Increases
    Accounted              $1,576 per employee. Thus, the cost of
    benefits for 1.9 million employees contributed an estimated $2.9
    billion, or 13.6 percent, of the $21.6 billion for Over 13 Percent
    of increase in the total payroll. However, the average annual
    increase per the Payroll Cost                 employee was about
    29 percent less than during the previous 5-year Increase
    period. Also, the total change in the cost of benefits, compared
    with the 5- year period preceding downsizing, was $4.2 billion
    less governmentwide, due primarily to the reduction in the number
    of employees. The cost of benefits per employee increased during
    the 5-year downsizing period, as well as between most of the years
    during the period, due primarily to increases in the cost of five
    benefits. The five benefits primarily responsible for the increase
    were health insurance premiums; retirement contributions,
    including agencies' contributions to employees' Thrift Savings
    Plan accounts; separation and severance payments; Social Security
    contributions; and other benefits, which included retirement and
    other benefits charged to agencies under special plans for non-
    U.S. citizens in foreign areas. Table 3.1 shows the change in the
    cost of benefits, per employee and governmentwide, between the
    beginning of fiscal year 1993 and the end of fiscal year 1997.
    Page 35              GAO/GGD-99-57 Payroll and Human Capital
    Changes During Downsizing Chapter 3 Annual Pay Comparability
    Adjustments Were the Primary Cause of Increased Payroll Costs
    Table 3.1:  Changes in Cost of Benefits per Employee and
    Governmentwide During Downsizing Change in cost of benefits per
    employeeChange in cost of benefits projected to 1.9 Benefit
    during downsizinga                 million employees (in
    thousands) Health insurance
    $249                                              $463,204 Life
    insurance
    (9)                                              (16,287)
    Retirement
    520                                               968,102 Social
    Security
    232                                               430,946 Workers
    compensation
    89                                               165,272 Overseas
    allowance
    (70)                                              (131,078)
    Severance/separation pay
    385                                               716,481 Other
    benefits b
    120                                               223,831
    Miscellaneous benefits c
    61                                               113,581 Total
    $1,576d                                            $2,934,051d
    aPer employee costs are calculated on the basis of all employees
    because data were not readily available on the specific number of
    employees who received each type of benefit. bOther benefits
    include agencies' costs for employees' retirement and other
    benefits under special plans for non-U.S. citizens in foreign
    areas. They also include relocation and other expenses related to
    the movement of employees to new duty stations. cMiscellaneous
    benefits include uniform allowances, nonforeign cost-of-living-
    adjustments (COLA), retention allowances, and recruitment and
    relocation bonuses. dNumbers do not total due to rounding. Source:
    GAO calculations based on OPM data. Although benefits costs
    increased during downsizing, the increases were at a lower rate
    than during the previous 5-year period. Benefits costs per
    employee increased by $315 annually during downsizing. This
    increase was $129, or about 29 percent, less than the annual
    increase per employee during the previous 5-year period. Appendix
    I contains additional information comparing the downsizing period
    with the previous 5-year period. Since the costs of benefits are
    generally determined by governmentwide policies, we obtained
    opinions from OPM officials who are knowledgeable of the effect of
    these policies. According to OPM officials, the primary reasons
    for the increases that did occur were agencies' costs for buyouts
    and for their contributions to employees' Thrift Savings Plan
    accounts. During downsizing, over 170,000 buyouts were paid,
    totaling about $3.9 billion in separation pay. OPM officials said
    that the increase in retirement and Social Security contributions
    during downsizing was due primarily to the increasing number of
    employees covered by the Federal Employees Retirement System
    (FERS). As employees increased their contributions- now averaging
    about 4 percent of annual pay-to the Thrift Savings Plan, the
    agencies had to match those contributions under FERS. In addition,
    under FERS, agencies are required to make Social Security
    contributions for the increasing number of employees in FERS. Page
    36               GAO/GGD-99-57 Payroll and Human Capital Changes
    During Downsizing Chapter 3 Annual Pay Comparability Adjustments
    Were the Primary Cause of Increased Payroll Costs During fiscal
    years 1993 through 1997, the cost of premium pay, exclusive
    Premium Pay                             of the effect of
    comparability and other pay increases, increased by $30 per
    Increases Were                          employee. Thus, the cost
    of premium pay contributed to increasing the total payroll cost
    for the 1.9 million employees by an estimated $0.1 billion,
    Minimal                                 or 0.3 percent, of the
    $21.6 billion increase in the total payroll. The annual average
    increase in the cost of premium pay per employee was about 91
    percent less than during the previous 5-year period. Also, the
    total cost of premium pay compared with the 5-year period
    preceding downsizing was $1.4 billion less on a governmentwide
    basis, primarily due to the reduction in the number of employees.
    Premium pay costs on a per employee basis increased during the 5-
    year downsizing period, as well as generally between years in the
    period. Although most types of premium pay decreased during
    downsizing, there was an overall increase, due primarily to
    increases in the costs of overtime, Sunday premium pay, and
    physicians' comparability allowances. Table 3.2 shows the change
    in the cost of premium pay, per employee and governmentwide,
    between the beginning of fiscal year 1993 and the end of fiscal
    year 1997. Table 3.2:  Changes in Cost of Premium Pay per Employee
    and Governmentwide During Downsizing Change in cost of premium pay
    per Change in cost of premium pay projected Premium pay
    employee during downsizinga              to 1.9 million employees
    (in thousands) Overtime
    $121                                       $225,506 Holiday
    (3)                                        (4,914) Sunday
    8                                         14,426 Night
    differential
    (15)                                       (28,758) Hazardous duty
    (1)                                        (2,308) Post
    differential
    (16)                                       (30,043) Supervisory
    differential
    1                                          2,625 Physicians'
    comparability allowances
    30                                         55,339 Cash awards
    (30)                                       (55,413) Other premium
    payb
    (63)                                      (117,862) Miscellaneous
    premium payc
    (2)                                        (2,978) Total
    $30                                        $55,618d aPer employee
    costs are calculated on the basis of all employees because data
    were not readily available on the specific number of employees who
    received each type of premium pay. bIncludes payments above the
    basic rates for any other premium pay, such as annual premium pay
    for regularly scheduled standby duty. cIncludes staffing
    differential and remote site allowance pay. dNumbers do not total
    due to rounding. Source: GAO calculations based on OPM data. Page
    37                GAO/GGD-99-57 Payroll and Human Capital Changes
    During Downsizing Chapter 3 Annual Pay Comparability Adjustments
    Were the Primary Cause of Increased Payroll Costs Premium pay
    increased on a per employee basis during downsizing, although the
    annual average increases were less than during the previous 5-year
    period. The annual average increase of $6 per employee during
    downsizing was about 91 percent less than the average annual
    increase of $70 per employee during the previous 5-year period.
    For additional information comparing the downsizing period with
    the previous 5-year period, see appendix I. We contacted agencies
    that experienced the highest increased costs for overtime, as well
    as for several other premium pays, during downsizing to identify
    the reasons for the cost increases. Department of Justice
    officials attributed increases in overtime, Sunday, and other
    premium pays to several factors, such as *  a growth in the law
    enforcement occupations that perform the majority of the
    department's overtime, holiday, Sunday, and night work (for
    example, the number of Border Patrol personnel increased by 33.2
    percent), and *  enactment of the Federal Law Enforcement Pay
    Reform Act of 1990, which raised hourly and biweekly premium pay
    caps, mandated higher special salary rates for certain law
    enforcement employees, and provided pay increases for such
    employees in specific large metropolitan areas.1 Justice officials
    also attributed increases in the amount of physician comparability
    allowances to a 55-percent increase in the Bureau of Prison's
    correctional officer workforce, which includes physicians.
    Department of Transportation officials said that their increases
    in Sunday premium pay, holiday pay, and other premium pays during
    downsizing were due to increased air traffic activity, which
    resulted in higher numbers of Federal Aviation Administration
    employees working hours that entitled them to premium pay. The
    average amount of cash awards and other premium pay per employee
    decreased annually during downsizing. DOD officials cited several
    reasons for the decrease in the amount of most cash awards and
    other premium pays, including a congressional mandate to reduce
    the overall defense budget. 1While this authority was enacted
    prior to the downsizing period, the effect continued during the
    downsizing period. Page 38                            GAO/GGD-99-
    57 Payroll and Human Capital Changes During Downsizing Chapter 3
    Annual Pay Comparability Adjustments Were the Primary Cause of
    Increased Payroll Costs DOD and OPM agreed with our findings. OPM
    also commented that the Agency Comments    increased cost of
    benefits was driven mainly by increases in direct agency payments
    for retirement contributions and health insurance that would have
    occurred in any case. Our review identified retirement
    contributions and health insurance premiums as two of the primary
    factors contributing to increased benefits costs, and they
    probably would have occurred without downsizing. However, the
    increase in severance pay, which contributed the second greatest
    amount to the overall increase in benefits costs, was affected by
    the buyouts and early retirements offered during the downsizing
    period we reviewed. Page 39            GAO/GGD-99-57 Payroll and
    Human Capital Changes During Downsizing Chapter 4 Career Steps,
    Other Pay Actions, and Workforce Composition Changes Contributed
    About One-Fourth of the Payroll Increase Pay actions other than
    comparability payments and the combined effect of hiring and
    separation patterns together resulted in an increase of about
    $3,180 per employee, or about $5.9 billion of the payroll increase
    for a constant workforce of 1.9 million employees during
    downsizing. The combination of these factors also contributed to a
    more highly paid workforce, with a higher proportion of employees
    in occupations with higher pay governmentwide and an increase in
    the average grade level from the beginning to about the mid-point
    of GS-9. Although grade levels increased, the increases in the
    average grade levels were about the same during the downsizing
    period and the previous 5-year period. Our analysis of
    governmentwide data also showed that reductions in the number of
    supervisors and managers during downsizing increased the ratio of
    supervisors to employees from 6.6 to 7.7 employees per supervisor
    but had a limited effect on the federal payroll. Career step
    increases, promotions, performance pay, and the combined Impact of
    Career                  effect of hiring and separation patterns
    contributed about $3,180 per Steps, Promotions, and employee and
    $5.9 billion of the $21.6 billion payroll increase for 1.9 million
    employees during downsizing. The resulting changes in the
    Performance Pay                   characteristics of the workforce
    caused the average grade level to increase from GS-9.1 to GS-9.5
    during downsizing. Although employees received fewer promotions
    during the downsizing period, this almost one-half grade increase
    was similar to the rate-of-grade increase during the previous 5-
    year period. Table 4.1 presents the total number and dollar
    amounts of pay actions during downsizing for employees still in
    the government in fiscal year 1997, exclusive of comparability pay
    adjustments. The pay actions increased the federal payroll in the
    years they were provided and in each succeeding year the employee
    remained in the federal government. The effect of this $6.1
    billion in pay increases on payroll cost was partially offset,
    however, by the combined effect of hiring and separation patterns-
    discussed in the next section-which served to lessen the payroll
    increase to $5.9 billion during downsizing. Page 40
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase Table 4.1:  Number and Amount of
    Increase in basic pay due to Personnel Actions Affecting Payroll
    Number of actions         actions during downsizing During
    Downsizing Period                  Type of action
    during downsizing                    (in thousands)a Career step
    increases                              2,924,480
    $2,733,829 Promotions
    1,033,254                       2,594,616 Performance based
    increases                          664,318
    812,003 Total
    4,622,052                      $6,140,448 aAmounts exclude the
    effect of comparability pay adjustments. Source: GAO calculations
    based on data in OPM's CPDF. Figures 4.1 and 4.2 show that the
    number and dollar amounts of promotions, career step increases,
    and performance-based increases varied during the downsizing
    period in comparison with the previous 5- year period. The average
    number and amount of promotions and the average number of
    performance pay awards decreased, while the average number and
    dollar amounts of career steps and the average dollar amounts of
    performance pay increased during downsizing. Figure 4.1:
    Annualized Average Number of Career Step Increases, Promotions,
    and Performance Pay Increases per 1,000 Employees During
    Downsizing Compared With the 5-year Period Before Downsizing
    Source: GAO calculations based on data in OPM's CPDF. Page 41
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase Figure 4.2:  Dollar Value of Career Step Increases,
    Promotions, and Performance Pay Increases per Pay Action During
    Downsizing Compared With the 5-year Period Before Downsizing
    Source: GAO calculations based on data in OPM's CPDF. During the
    5-year downsizing period, 2.9 million career step increases for
    Career Steps                                employees still in the
    federal workforce in fiscal year 1997 accounted for an increase in
    federal basic pay of about $2.7 billion, exclusive of
    comparability pay increases. Career step increases are based on
    the amount of time spent by an employee in a given grade and step
    and an employee's demonstration of an acceptable level of
    competence. Increases for GS employees may occur every 52, 104, or
    156 weeks, depending on the employee's step. Exclusive of annual
    pay comparability adjustments, the annual average number and
    dollar amount of all career step increases during downsizing were
    348 per 1,000 employees and $789 per career step, respectively.
    This was an annual average increase of 1 career step per 1,000
    employees and $46 per employee compared with the average for the
    previous 5-year period. During the downsizing period, employees
    who were still in the federal Promotions
    workforce in fiscal year 1997 received about 1.0 million
    promotions to a higher grade level, which increased federal basic
    pay by about $2.6 billion, exclusive of annual comparability
    adjustments. The annual average number and dollar amount of all
    promotions during downsizing was 122 per 1,000 employees and
    $2,120 per promotion, respectively. Compared Page 42
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase with the previous 5-year period, this was an annual
    average decrease of 48 promotions per 1,000 employees and about
    $18 per promotion, exclusive of pay comparability adjustments.
    During the downsizing period, about 700,000 performance pay
    increases Performance Pay         were awarded to employees still
    in the federal workforce in fiscal year 1997, which increased
    federal basic pay by about $0.8 billion, exclusive of
    comparability pay increases. Performance pay increases were a
    combination of GS quality step increases and merit pay increases.
    Quality step increases are step increases granted by the head of
    an agency in recognition of high quality performance and above
    that ordinarily found in the type of position concerned. Unlike
    career step increases, quality step increases can be granted
    annually. GS quality step increases were awarded only to
    nonsupervisory and nonmanagement employees during the 5-year
    period preceding downsizing and through the end of fiscal year1993
    during downsizing. Merit pay increases were awarded in the
    Performance Management and Recognition System, which existed
    between the beginning of fiscal year 1985 and the end of fiscal
    year 1993. This program established step and partial step
    increases for managers and supervisors in grades GS-13 through GS-
    15 who received certain high level ratings. When this program was
    terminated, these employees became eligible for the GS career and
    quality step increases. The annual average number and dollar
    amount of all performance step increases during downsizing were 80
    per 1,000 employees and $1,035 per performance step, respectively,
    exclusive of annual pay comparability adjustments. These figures
    represented an annual average decrease of 10 quality performance
    steps per 1,000 employees and an increase of $47 per step,
    compared with the previous 5-year period. In addition to the pay
    actions discussed in the previous section, hiring and Impact of
    Hiring and    separation patterns also affected the workforce
    composition during Separation Patterns     downsizing. The
    combination of hiring and separation patterns lessened the extent
    to which the average payroll cost and grade level increased during
    downsizing and, to an even greater extent, during the previous 5-
    year period.  Hiring and separation patterns, however, caused
    employees' average age and length of service to increase at a
    greater rate during downsizing than in the previous 5-year period.
    Hiring and separation patterns had a limited effect on the
    proportion of employees in occupational categories. Page 43
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase While career steps, promotions, and performance pay
    directly increased Hiring and Separation        individual
    employees' pay and grade level as well as the overall payroll
    Patterns Lessened Payroll    cost and grade averages, hiring and
    separation patterns can also affect the and Grade Increases
    governmentwide average grade and payroll cost. The pay actions
    increased the total basic pay of the recipient employees still in
    the government in fiscal year 1997 by $6.1 billion. However, due
    to hiring and separation patterns, the total basic pay of all
    employees in fiscal year 1997 was only $4.7 billion greater than
    the total basic pay for a constant workforce of 1.9 million
    employees in the beginning of fiscal year 1993. This only modest
    increase was due to new hires with lower average basic pay
    entering the government and employees with higher basic pay
    separating from the government during downsizing, which had the
    effect of lessening the increase in total basic pay by $1.4
    billion, or about $775 per employee. As previously discussed, most
    benefit costs and premium pay are proportions of basic pay, and
    thus the increase in basic pay also increased benefit costs and
    premium pay of the employees by $1.2 billion governmentwide. As a
    result, the net average payroll increase was $5.9 billion, $4.7
    billion in basic pay and $1.2 billion in premium pay and benefits.
    New hires also were employed at lower grade levels, and thus
    reduced the extent to which governmentwide average grade levels
    increased. On the other hand, the separation of employees with
    grade levels below the governmentwide average-which occurred in
    both 5-year periods- increased average grade levels. Thus, as a
    result of the combined effect of pay actions and hiring and
    separation patterns during downsizing, the average grade level
    increased from GS-9.1 to GS-9.5. The number of new hires during
    downsizing was about 300,000 fewer than the number of separations,
    compared with the previous 5-year period in which the number of
    new hires exceeded the number of separations. From fiscal years
    1993 through 1997, the combined effect of hiring fewer and
    separating a larger proportion of staff at grade and pay levels
    below the governmentwide average lessened, by about 6 steps, the
    increases that would otherwise have resulted from the pay actions
    related to individual employees.1 In comparison, hiring and
    separation patterns lessened the effect of pay actions by 7 and
    1/2 steps during the prior 5-year period. 1The average grade and
    step levels cannot be used to compute the dollar impact on the
    federal payroll because the composition of the average may vary
    and each higher grade and step level does not necessarily equate
    to higher pay. For example, if an average grade of GS-9, step 1,
    was composed of a GS-8, step 8, and a GS-9, step 4, the average
    pay of the two employees would actually be much higher than GS-9,
    step 1, pay since both a GS-8, step 8, and a GS-9, step 4, receive
    pay rates higher than GS-9, step 1. Page 44
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase To illustrate how hiring and separation patterns can
    lessen grade level increases due to pay actions, consider two
    employees: a GS-8, step 1, and a GS-10, step 1. In this case, the
    average grade would be GS-9, step 1. Assume that during the next 5
    years, the GS-10 received 4 promotions to GS-14, step 1, while the
    GS-8 separated from the government and was replaced by a new hire
    at GS-6, step 1. The resulting increase in average grade would be
    one grade, from GS-9 to GS-10 (the average of a GS-6, step 1, and
    GS-14, step 1). However, had the GS-8 stayed in the government and
    not received any grade or step increases, the average grade would
    have increased by two grades to GS-11 (the average of GS-8, step
    1, and GS-14, step 1). During the downsizing period, the average
    age and years of service of Employee's Average Age
    federal employees increased by 1.7 and 1.6 years to 45.1 and 16.0
    years, and Length of Service             respectively, at the end
    of fiscal year 1997. These increases were Increased at a Greater
    Rate       respectively 55 and 100 percent greater than the 1.1
    and 0.8 year increases Due to Hiring and                 in the
    average age and years of service experienced during the previous
    5- year period. We did not analyze the ages and years of service
    for the Separation Patterns               employees leaving and
    entering the federal government during downsizing. However, the
    accelerated increase in the average age and service of federal
    employees indicated that the combination of ages and years of
    service of the employees separated and hired during downsizing,
    and the reduced level of hiring, contributed to an older, more
    experienced workforce. Although the total number of employees in
    individual occupational series Hiring and Separation
    sometimes changed fairly substantially, shifts in the proportion
    of federal Patterns Had Limited              employees in broader
    occupational categories-another measure of the Impact on the
    Proportion of composition of the workforce-were much less
    pronounced. For example, Employees in Occupational the secretarial
    occupation within the clerical category decreased by 28,721
    employees. While this represented about a 31-percent decrease in
    the Categories                        number of secretaries in the
    government, the clerical category decreased overall by only 3.2
    percentage points. Within broad occupational categories, the more
    highly paid professional and administrative categories experienced
    the greatest increases. As table 4.2 shows, the percentage of
    employees governmentwide in the administrative and professional
    categories increased by 3.6 and 1.8 percentage points,
    respectively, from January 1, 1993, to March 31, 1998. These
    increases were small primarily because, while the administrative
    and professional occupations comprised about 25 and 22 percent of
    employees governmentwide as of January 1, 1993, only 21 and 19
    percent of these employees, respectively, separated during
    downsizing. Page 45             GAO/GGD-99-57 Payroll and Human
    Capital Changes During Downsizing Chapter 4 Career Steps, Other
    Pay Actions, and Workforce Composition Changes Contributed About
    One-Fourth of the Payroll Increase Table 4.2:  Proportion of
    Employees in, Separated From, and Newly Hired Into Occupational
    Categories During Downsizing Percentage of
    Percentage Percentage as of                 employees
    Percentage of new      Percentage as of difference between
    Occupational category             1/01/93
    separating                 hires              3/31/98 1/01/93 and
    3/31/98 Professional                         22.3
    18.9                  17.9                24.1
    1.8 Administrative                       25.0
    21.0                  10.6                28.6
    3.6 Technical                            18.6
    19.2                  22.2                19.0
    0.4 Clerical                             15.5
    18.9                  28.2                12.3
    (3.2) Other                                 2.5
    3.9                   6.1                 2.6                  0.1
    Blue collar                          16.1
    18.1                  15.0                13.4
    (2.7) Total                              100.0
    100.0                 100.0               100.0
    0.0 Source: GAO calculations based on data in OPM's CPDF. Non-DOD
    agencies experienced most of the changes in the administrative and
    professional occupational categories. Non-DOD agencies' employees
    in the two categories increased by 3.1 and 1.8 percentage points
    during the governmentwide downsizing period. DOD agencies'
    employees in the administrative and professional occupations
    increased by 0.5 and 0.1 percentage points, respectively, during
    the same period. The Department of Transportation experienced the
    highest percentage increase in administrative employees due in
    part to the transfer of about 6,300 employees from a clerical
    occupation to the newly established administrative occupation of
    airway transportation systems specialist in the Federal Aviation
    Administration (FAA). According to FAA officials, the new
    occupational series more closely matched the transferred
    employees' duties and responsibilities. The proportion of
    employees in the blue collar and clerical occupations in the
    overall workforce decreased by 2.7 and 3.2 percentage points,
    respectively, from January 1, 1993, to March 31, 1998. Blue collar
    and clerical occupations comprised 16.1 and 15.5 percent of the
    workforce, respectively, as of January 1, 1993, but experienced
    18.1 and 18.9 percent, respectively, of the separations during
    downsizing. And while 15.0 and 28.2 percent of the new hires
    entered these occupations, respectively, they were fewer in number
    than the employees separating. For example, there were 74,446 new
    hires in the clerical category, while 127,431 employees separated.
    DOD agencies experienced the greatest change in the clerical and
    blue collar occupations, with decreases of 1.9 and 2.6 percentage
    points, respectively, while non-DOD agencies' employees in these
    categories decreased by 1.3 and 0.1 percentage points,
    respectively, from January 1, 1993, to March 31, 1998. Defense
    Logistics Agency officials told us that the Page 46
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase reduction in the proportion of blue collar employees
    occurred because of base closures of depot activities heavily
    populated with blue collar employees. The Department of Navy also
    cited base closures as a primary reason. During the downsizing
    period, a number of DOD bases were closed, and the contracting out
    of services increased. Changes in the occupational categories
    continued a trend that existed during the 5-year period before
    downsizing. The same occupational categories increased
    (administrative, professional, technical, and other) and decreased
    (clerical and blue collar) during the downsizing period as during
    the preceding period, with the only variation being the extent of
    the change.  For example, the professional category increased by
    3.3 percentage points before downsizing compared with 1.8
    percentage points during downsizing. During downsizing, the number
    of supervisors and managers decreased Decrease in Number of and
    the ratio of staff to supervisors increased governmentwide, but
    the Supervisors and                 effect on the federal payroll
    was limited. While the staff-to- supervisor/manager ratio did not
    meet the former National Performance Managers Had Limited Review's
    goal of 15 to 1, the governmentwide ratio did increase from 6.6 to
    Payroll Impact                  7.7 employees per supervisor or
    manager during downsizing.2 The number of supervisors and managers
    declined by 88,162, or 26.5 percent, from 332,100 to 243,938
    governmentwide from the beginning of fiscal year 1993 through
    fiscal year 1997. The net decrease was composed of (1) 202,626
    employees who left supervisory and management positions, and (2)
    114,464 employees who became supervisors and managers through
    hiring, promotion of other staff, and other personnel actions. Of
    the 202,626 employees who left their supervisory and management
    positions during downsizing, 74,757, or 36.9 percent, left the
    federal government. The remaining 127,869 employees were
    reclassified as nonsupervisory or nonmanagement, 59,080 of whom
    were either transferred or downgraded to other positions; OPM data
    did not indicate how the other 68,789 were reclassified. Many of
    the supervisors and managers were reclassified as team leaders. An
    OPM official said that, although our analysis indicated there were
    2,295 such reclassifications, the number may be understated
    because, through 2The National Performance Review was established
    by the Clinton administration to reinvent the federal government.
    The Review was replaced by the National Partnership for
    Reinventing Government in 1998. Page 47
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Chapter 4 Career Steps, Other Pay Actions, and Workforce
    Composition Changes Contributed About One-Fourth of the Payroll
    Increase fiscal year 1997, many agencies were not yet using any
    code for identifying team leaders when submitting data to OPM. In
    several respects, team leaders perform duties similar to those of
    supervisors and managers, as indicated by OPM's General Schedule
    Leader Grade Evaluation Guide, which defines the duties an
    employee must perform to be classified as a team leader. The guide
    states that leadership and supervision may be thought of as points
    along a continuum from nonsupervisory to managerial work. The
    range of duties a team leader may be assigned is very flexible-for
    example, duties may be just sufficient to meet the minimum for
    classification as a team leader to almost sufficient to warrant a
    supervisory classification. Team leaders are responsible for
    coordinating and supporting the work of their assigned teams to
    ensure that the work is completed. Their specific duties and
    responsibilities include ensuring that the organization's mission
    is communicated to the team and integrated into the team's work
    plans and products, and leading the team in balancing the workload
    among team members according to skill levels. The
    reclassifications and separations of supervisors and managers,
    combined with the addition of newly hired or designated
    supervisors and managers, resulted in a small increase in payroll.
    Over 50 percent, or 1 of every 2 supervisors and managers, was
    replaced through new hires, promotions of other staff, and other
    personnel actions. The basic pay of these replacements, combined
    with the promotions received by some of those reclassified from
    supervisory and managerial positions, exceeded the total basic pay
    for supervisors and managers who left government plus the total
    reduction in basic pay experienced by some of those who were
    reclassified. Table 4.3 shows the estimated increase in the
    federal payroll during downsizing due to the situation described
    above. The estimate assumes that most of the new supervisors and
    managers who were not hired from outside government were either
    replaced in their previous positions by new hires or that,
    somewhere in the line of succession caused by the vacancy in their
    former position, an employee from outside the government was
    hired. We assumed that, based on the governmentwide employee
    reduction rate of about 14 percent, 14 percent of the new
    supervisors and managers were not replaced in their former
    positions. We could not verify our assumption because the CPDF did
    not have information with which to determine whether newly
    appointed supervisors or managers or other employees were replaced
    in their former positions by new hires or existing employees. Page
    48             GAO/GGD-99-57 Payroll and Human Capital Changes
    During Downsizing Chapter 4 Career Steps, Other Pay Actions, and
    Workforce Composition Changes Contributed About One-Fourth of the
    Payroll Increase Table 4.3: Effect of Acquiring and Separating or
    Reclassifying Supervisors and Managers Governmentwide During
    Downsizing Total increase or Number of supervisors and
    (decrease) in basic Personnel action
    managers                           pay (in thousands) New
    supervisors and managersa
    114,464                                       $4,694,688 Former
    supervisors and managers Separated supervisors and managers
    (74,757)                                      (4,533,121)
    Reclassified supervisors and managers whose pay remained the same
    (114,711) Reclassified supervisors and managers whose pay
    decreasedb
    (13,096)                                            (53,496)
    Reclassified supervisors and managers whose pay increasedc
    (62)                                                229 Net
    increase or (decrease)
    (88,162)                                          $108,300 aAmount
    attributed to new supervisors' and managers' basic pay was
    adjusted based on assumption that 14 percent were not replaced in
    their former jobs. bSince reclassified supervisors and managers
    remained in the government, only the amounts of decreases in their
    basic pay were considered in computing reductions in the federal
    payroll. cReclassified supervisors and managers who received
    promotions within 2 weeks of having their position changed or of
    being downgraded. Source: GAO calculations based on data in OPM's
    CPDF. The impact on the federal payroll of the reduction in the
    number and proportion of supervisors and managers can also be
    considered from another perspective. While the number of
    supervisors and managers decreased, the number of employees in the
    grade and pay levels usually occupied by supervisors and managers-
    GS-12 and above-increased by 3,580 employees, from 554,419 to
    557,999, during downsizing. This indicates that, while the
    supervisory and management positions decreased, similarly graded
    and paid positions increased during downsizing. This was partially
    due to the fact that most former supervisors and managers retained
    their grade and pay levels. The results of our governmentwide
    review are consistent with changes at the Social Security
    Administration (SSA) during fiscal years 1994 through 1998.3 SSA,
    while reducing its supervisor to employee ratio, at the same time
    created 1,900 new nonsupervisory positions, most of which were
    filled by former supervisors. Consistent with OPM guidance, the GS
    grades and salaries of these former supervisors did not change.
    The total number of SSA employees in grades GS-12 and above
    increased by over 900 employees during this time. DOD and OPM
    concurred with our findings. OPM noted that the changes in Agency
    Comments                             the composition of the
    federal workforce likely reflected the continuation of a long-term
    trend away from a technical and clerical workforce toward a more
    professional and administrative workforce. 3Social Security
    Administration:  Compliance With Presidential Directive to Reduce
    Management-to- Staff Ratio (GAO/HEHS-99-43R, Jan. 22, 1999). Page
    49                            GAO/GGD-99-57 Payroll and Human
    Capital Changes During Downsizing Appendix I Comparison of Benefit
    Costs and Premium Pays per Employee for the 5-Year Periods Before
    and During Downsizing Table I.1: Changes in Annual Average Cost of
    Benefits per Employee During Downsizing Due to Changes in Benefits
    and Comparability and Other Pay Actions Annual average
    Annual average
    Amount of change change per             change per         Amount
    of the Amount of change per employee due to employee before
    employee during change between per employee due
    comparability and Benefit                           downsizing
    downsizing               the periods             to benefits
    other pay actions Health insurance                   $194.68
    $49.77                $(144.91)              $(144.91)
    $0.00 Life insurance                           1.51
    1.46                   (0.05)                    0.25
    (0.30) Retirement                             290.04
    275.39                  (14.65)                (44.99)
    30.34 Social Security                        144.13
    116.53                  (27.60)                (43.07)
    15.47 Workers' compensation                    3.48
    31.21                   27.73                   28.61
    (0.88) Overseas allowance                      20.79
    (4.59)                 (25.38)                (23.12)
    (2.26) Severance/separation pay                 4.90
    92.12                   87.22                   74.43
    12.79 Other benefitsa                         19.81
    36.49                   16.68                   17.69
    (1.01) Miscellaneous benefitsb                  6.64
    16.47                    9.83                     5.92
    3.91 Total                              $685.98
    $614.85                  $(71.13)              $(129.19)
    $58.06 aOther benefits include costs charged to the agency for
    employee's retirement, and other benefits under special plans for
    non-U.S. citizens in foreign areas. Also includes relocation and
    other expenses related to permanent change of station.
    bMiscellaneous benefits include uniform allowances, nonforeign
    COLAs, retention allowances, and recruitment and relocation
    bonuses. Source: GAO calculations based on OPM data. Page 50
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Appendix I Comparison of Benefit Costs and Premium Pays per
    Employee for the 5-Year Periods Before and During Downsizing Table
    I.2:  Changes in Annual Average Cost of Premium Pays per Employee
    During Downsizing Due to Changes in Premium Pays and Comparability
    and Other Pay Actions Annual average         Annual average
    Amount of change change per            change per        Amount of
    the Amount of change per employee due to employee before
    employee during change between per employee due to
    comparability and Premium pay                       downsizing
    downsizing                periods          premium pays
    other pay actions Overtime                            $76.58
    $79.73                 $3.15                   $(3.89)
    $7.04 Holiday                               2.99
    4.48                 1.49                      1.03
    0.46 Sunday                                4.63
    6.26                 1.63                      0.90
    0.73 Night differential                    5.61
    2.58                (3.03)                   (2.83)
    (0.20) Hazardous duty                        0.70
    0.89                 0.19                    (0.20)
    0.39 Post differential                     2.09
    (1.90)                (3.99)                   (3.81)
    (0.18) Supervisory differential              0.13
    1.37                 1.24                      0.15
    1.09 Physicians' comparability            30.55
    13.87              (16.68)                   (24.61)
    7.93 allowances Cash awards                          35.42
    11.34               (24.08)                   (26.11)
    2.03 Other premium paya                    7.59
    (1.14)                (8.73)                   (3.82)
    (4.91) Miscellaneous premium payb            0.32
    (0.28)                (0.60)                   (0.64)
    0.04 Total                              $166.61
    $117.20              $(49.41)                 $(63.83)
    $14.42 aOther premium pay includes payments above the basic rates
    for any other premium pay, such as annual premium pay for
    regularly scheduled standby duty. bMiscellaneous premium pays
    include staffing differential and remote site allowance pay.
    Source: GAO calculations based on OPM data. Page 51
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Appendix II Comments From OPM Page 52    GAO/GGD-99-57 Payroll and
    Human Capital Changes During Downsizing Appendix III GAO Contacts
    and Staff Acknowledgments Michael Brostek,   (202) 512-8676 GAO
    Contacts Larry H. Endy,   (202) 512-8676 In addition to those
    named above, Thomas C. Davies Jr., M. Wayne Barrett,
    Acknowledgments    Rebecca L. Shea, and Gregory H. Wilmoth made
    key contributions to this report. Page 53         GAO/GGD-99-57
    Payroll and Human Capital Changes During Downsizing Page 54
    GAO/GGD-99-57 Payroll and Human Capital Changes During Downsizing
    Page 55    GAO/GGD-99-57 Payroll and Human Capital Changes During
    Downsizing Page 56    GAO/GGD-99-57 Payroll and Human Capital
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