HOW TO BARGAIN AROUND PAY FREEZES

Thanks to warring politicians, it looks like we are headed for another year without an annual pay adjustment in January.  Consequently, unions need to focus more on how to increase employee compensation through contract negotiations.  One way to do that is to negotiate for guaranteed performance awards for employees.  Very few federal sector contracts have them, but they are worth millions for those that do.  Here is an example such agreements from one of the contracts in our Compare Contracts menu bar above.

The first element of the agreement is to set the amount of money that will be put aside each budget year to be distributed as performance awards to unit employees.  While unions can rarely bargain over the precise amount that will be budgeted from a program, they can submit I & I proposals that make it much easier for management to agree to unilaterally set an agreeable figure and place it in the contract.

Section 1A

1. The Employer has determined that it will distribute 1.75% of total annual bargaining unit salary pursuant to the NTEU-IRS Contract Award program discussed below. “Total annual bargaining unit salary” will be determined by the total prior fiscal year actual salary cost (base + locality) of bargaining unit employees not covered by incentive pay or gainsharing, adjusted for subsequent increases in Government-wide civilian pay raise adjustments, if any.

Once the total amount of award money available is set, the contract must address how it is to be distributed.  In this case the parties agreed that management would retain the discretion to distribute up to 10% of the total annual awards budget via their discretion.  The remaining 90% of the budget must be distributed in accord with a negotiated formula.

2. The bargaining unit awards funding will be allocated first to Bilingual Awards and other awards required to be paid under negotiated provisions. After this allocation, the remaining funds will be distributed as follows: ninety percent (90%) to performance awards agreement, and ten percent (10%) to other discretionary awards for bargaining unit employees.

Although the details are not included in the master agreement, they are spelled out in a MOU.  In short, the program works like this.  Pools of employees are established based on their occupation, work division, and geographic location. Once all annual performance appraisals have been issued, everyone’s average critical element score is compared to everyone else in his/her pool and the top 55% of the employees in the pool, plus ties, get awards. 

The precise amount of the awards is based on multiplying the employee’s grade times his/her average CE score.  That identifies the number of shares the employee is entitled to receive.  Once everyone’s individual share amount is set, all the shares of the top 55% of the employees in the pool are added together and that aggregate figure is divided into a pot of awards money equal to 90% of 1.75% of the total annual salaries of everyone in that pool.  For example, if the total salaries in a pool amounted to $1,000,000, the award budget that must be distributed for that pool would be 90% of $17,500 or $15, 750.

If an individual share is worth $40. and a GS-13 employee received an average CE appraisal score of 4.0, the employee would receive 52 shares or $2080 as a performance award.

 Of course the parties have supplemented the basic formula with some additional rules such as the following:

 Section 2A

2. Subject to the prorating provisions of the NPAA, the minimum performance award is $500. The maximum performance award is $3500.

3. Employees with an average CJE score lower than 3.4 will not be eligible for a performance award.

Negotiating guaranteed award clauses is tricky.  You hve to convince management such clauses are in its best interest and steer around negotiability hurdles for how to word the agreement.  You also need a system that is seen by everyone as equitable and fair.  But it has been done. There is even FSIP precedent for guaranteed performance award programs, e.g. 10 FSIP 10 (2011).