Federal Merit Pay: A Longitudinal Analysis.

Merit pay for the federal employees is a controversial personnel program that bases compensation of grades 13-15 supervisors and managers on their rated performance. Under the Civil Service Reform Act of 1978, merit pay was implemented concurrently with a new, untested, objectives-based performance appraisal system. The motivational model of behavior on which merit pay is based is used here to analyze data from five federal agencies. The results indicate that, as perceived by affected employees, the new performance appraisal system does not effectively measure performance and therefore does not serve the purpose of the merit pay program to link pay to performance. Other implementation contingencies, such as the pay cap on managerial salaries, uncertainties associated with the presidential transition, and an eleventh-hour change in the merit pay formula, also appear to have contributed to the perceived ineffectiveness of merit pay. From a policy perspective, the results suggest that performance appraisal systems need to be improved to accomplish the motivational objectives of merit pay. Furthermore, there is no indication that the merit pay experiment at grades 13-15 has been sufficiently successful to proceed with plans to include employees in Grades 1-12. [ABSTRACT FROM AUTHOR]