Pay-for-Performance (Federal Government)

Pay-for-Performance (Federal Government) is a method of employee motivation meant to improve performance in the federal government by offering incentives such as salary increases, bonuses, and benefits. It is a similar concept to Merit Pay for public teachers and it follows basic models from Performance-related Pay in the private sector. According to recent studies, however, there are key differences in how pay-for-performance models influence federal employees in public service roles.James Perry is one scholar who has conducted such studies. His research reveals that public servants tend to be more intrinsically motivated, and thus, are prone to have a negative reaction to monetary incentives. There is still debate, however, on what exactly makes the public sector different.

Pay-for-performance programs first began in the private sector. As consultants, academic experts, and employee advocate groups analyzed merit pay systems' success in private businesses, they recommended expanding this method into the public sector. One vital omission in the process of implementation, however, is that the policy makers failed to consider that the stakeholders in the private sector differ from those in the public sector.

The first trial run of a pay-for-performance system came in the late 1970s. In 1978 President Jimmy Carter introduced the broad outlines of the Civil Service Reform Act in his State of the Union message. It was the first time a U.S. President had ever included civil service reform among his major legislative proposals.

The Civil Service Reform Act of 1978 created the Office of Personal Management, to oversee the human resource management of the federal government, and the Merit Systems Protection Board, to regulate the merit system and prevent any abuse. The major provisions in the act included, but were not limited to, performance appraisals for all employees, merit pay on a variety of levels (but focusing on managerial levels), and modifications for dealing with poor performers. This merit pay system was a break in the long tradition of automatic salary increases based on length of service. Under the new act, employees only got half of their traditional automatic salary increase. The remaining non-automatic portion was divided up according to performance rating. A key part of this system was that it was revenue neutral—this meant that when some employees benefited under the new system, others would of necessity be receive less than in the previous system.

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