Thread: End All 2-Tier Pay/Retirement Plans : They Don't Work

This type of news certainly bears wathching very closely. I believe 'entitlements' in the form of retirement, healthcare, and minimum wage will soon be on the auction block.

If the private sector is going through this transformation when will the politics of envy peel back the layers of onionexposing federal 'entitlements'?

I really don't think the unions fully understand what they are up against. If they movemanufacturing off-shore, these people won't have jobs. The union isn't on the leveraged side of the negotiation. I know union issues can be a sensitive topic and it is not my intention to debate the value of the union one way or the other.

Just a few years ago the agency I worked for switched to pay banding and all new hires were pretty much locked into the band they were hired at. In a few instances there were promotions, but by and large they were stuck. Maybe the two tiered pay system started with the feds.

Wimpy,

Thanks for your comment. AND A BIG TSPTALK WELCOME TO YOU!

How did Pay-banding effect existing employeeswhen/after it was started in your agency?

Thanks,
Greg

Thanks for the welcome!

Re: effect of paybanding on existing employees -- Initially, on the transfer to pay banding, we received a smallraise, but in comparing where I would've been had I remained in the GS-schedule...I would've have been considerably ahead.

Pay banding has represented a loss in pay and will also result in a loss in retirement.

Why is Delphi going into bankruptcy - perhaps forcing the Fed boys to recognize a financial crises with apparent magnitude. The foolish Fed has got to be feeling pressure to pause before they ruin the whole country in their quest to fight a small amount of impending inflation. They like to creat pain and they are finally having some resounding success. Will they force GM into chapter 11? Damn peterheads have already gone too far post Katrina and Rita. I hate'm - smucks.There certainly won't be any wage-price spiral in that industry to fuel the expectations of inflation.

Dennis

Interesting subject

I well remember what happen to the steel industry in the mid-1980's and to most communities that had a mill. Generally, it was the largest employer of a given county be it in SW Penna, or Cleveland, or Youngstown (Ohio), or Gary, Ind, or South Chicago or Bethlehem, Pa., or Lackawanna, NY, or Hennepin, Ill. The small of those places looked like ghost towns afterwards.

Part of the problem is health care costs. Both the Japanese and the Canadians have national health insurance plans for its people, so that keeps the expense burden off individual corporations to provide that for its employees.

So, for American workers to be asked to take pay AND benefit cuts is a rather hard demand, especially since there is no national health care here as there is in Japan and Canada.

Some of the problems had to do with what I thought were excessive environmental standards for that industry.

Some would say pay and benefits had something to do with its demise, but I would add that usually technological advances would pare the workforce to compensate for such things.

Moststeelworkers got creamed when it was all said and done; their standard of living was severely disrupted and I would venture to say most haven't done as well since.

You said it best Wimpy. "Politics of envy". There was A LOT of that too at the time.

So. I don't feel bad for the UAW or its membership; not out of envy, but they sure didn't stand with the steelworkers 20 years ago when many lost their butts and then some. The same thing will happen to the UAWas what happen to the USW and its membership. Many will have their heads handed to them and their hearts ripped out. It will be like roadkill.

Much will be said about re-training and etc., butmost will never make the money they had before let alone the benefits;some will be forced to relocate far, far away.

And GM is going to shrink.

The troubling part is using bankruptcy to ditch labor contracts and pensions; hell, it screws stockholders as well; the only beneficiaries of bankruptcy are the executives way up on top; they still get paid very well.

I object to the use of the word entitlement for one's pay and benefits. It is not an entitlement, it is pay and benefits. Medicare is an entitlement. Medicaid is an entitlement. I wouldn't call Social Security an entitlement since those who are eligible for it have directly paid into it for an extended period of time.

I haven't heard much of pay banding -- only a little bit. But it sounds like a can of worms. It would be good to have more details about it.

Quips,

One of the main selling points of pay banding was ‘pay for performance’. In theory it would give management more latitude in rewarding the producers. The problem with it was lack of follow through. Management didn’t receive enough training to make it viable and I don’t believe the follow through part was written into their (management’s) performance plans. The closet brown nosers had a ‘coming out’ party and those managers who were easily impressed got an ego boost, but that was just about the extent of it.

Personally, I think the whole deal with pay banding was a cost cutting measure.

I don’t like the word ‘entitlement’ when it comes to pay either, but it appears it is being used in that fashion. If you think about it, workers in the GS-Schedule ARE ‘entitled’ to their automatic step increases and those workers on a GS-Schedule career path of GS-7, 9, 11, & 12 ARE ‘entitled’ to their automatic grade progression. Granted, there is a ‘satisfactory’ performance requirement associated with the annual performance appraisal to get the ‘entitlement’, but if one can fog a mirror…they get it. Under pay banding that ‘entitlement’ or expectation of automatic grade or step increase went away. Under pay banding, we still get the 3.5 % or whatever the president grants each year and there is also an organization increase of .5% or so each year if the organizational goals are met, but the rest is gone forever.

The most troubling part of this whole bankruptcy business IS the lucrative pay and benefits received by the CEOs. The disparity between the CEOs padded benefits and those left without a job or benefits is HUGE. What will make matters much worse for the likes of Ford and GM workers is when China begins importing cars into the United States. Granted, those cars will cost much less than their Ford or GM counterparts, but if you are out of work what difference does it make?

You are absolutely correct when you imply that those surviving this mess will do so by relocating far, far, away. Mobility will be the key to personal economic survival whether we area talking about corporate or government downsizing. The problem with the mobility issue is real estate. Most people are already maxed out to the limit on credit. The very last thing they could afford to do, at this point, is maintain their primary home and rent an apartment wherever their job is. And since most households rely on two incomes to make ends meet it might be rather difficult for the second income provider to leave their job to move so the primary home could be rented out. And who will they rent their primary home to if a large part of the town is dependent on the bankrupt industry who just laid off several thousand people. There will be a glut of rentals in that community. Many people will have difficult choices to face in the near future. It is apparent that the survivors will be those that have their credit under control and have the mobility to go wherever the jobs take them.

During the age of union concessions, when the economy wasn’t doing all that good, union workers accepted wage concessions for better healthcare benefits. Healthcare wasn’t all that expensive back then, but healthcare costs have skyrocketed of late. Part of the problem, as I see it, is there has been, historically, little personal incentive for workers to make good decisions to help keep healthcare costs down. I think forward thinking companies are going to be coming up with innovative ways to put the onus on the worker to make better healthcare decisions that will directly benefit the worker and the company. My wife’s employer has already started this process. Hopefully, with workers taking more responsibility for their health and health care decisions the demand side of the problem can help lower the cost of healthcare.

Another factor with healthcare costs is the quality of food we eat. Households depending on two incomes seldom have time to prepare food from scratch. Everything comes out of a can or a box for convenience and time savings. It is kind of a vicious treadmill we find ourselves on at times.

Our Navy organization went to a DEMO pay-banding system seven years ago (March 1998).It is my opinion that this DEMO system and the new National Security Personnel System (NSPS)system for DOD are not for the benefit of thefederal employee. They were devised to bust all federal unions, andsuppress the federal pay scales. All fiscal power is placed in the hands of management to dole outpay increase to favored employees. One is judgednot how well you perform your job, but on how your actions influence and promote those in management. This makes you a favored employee who is then placed in a new position, which is earmarked for promotion (next pay band).


My personal experience is I did not receive anypay increase (merit pay) in that seven and one-half year period. I did receive a bonus (incentive pay, 1%-2% salary) each year, but not a pay increase that would increase my retirement annuity. I am now retired and can only hope that those who remain can endure this feudalistic human resource system. Never like the words “HUMAN RESOURSE� to describe the federal employee! It’s so impersonal!

I'm in an agency that has core comp and FG grades. The Administrator has been negotiating with the labor unions, of employees not core comp, to try and get everyone into core comp. As has been previously pointed out in other posts - after about the 3rd year in core comp - the wage spread becomes apparent. Most who have opted for core comp now wish they had stayed in the traditional FG/GS system. Sure, they have an initial pay increase but after that, they are at the mercy of their administration :s. So,our unions are trying to negotiate a position that keeps the spread equal. Not going to happen but as long as the negoitations continue we are making money staying out of core comp.Back in '84 the government did everything it could to sell us on how good FERS was to get us out of CSRS and a lot of usdidn't buy into it. History is repeating itself with trying to sell us on core comp. Anyone who thinks the government is looking out of us and doingwonderful things for our benefitis not all here. Itboils down tocost cutting measures.

The only comment I have about the labor issues in ALL industries today is: A job beats no job. Granted, folks can strike but like the Northwest mechanics found out - they can be replaced by workers from a pool of thousands of mechanics that are out of work from other carriers. It was reported that there were 1400 applicants for 300 positions. Example of available mechanics is TWA, Delta, and American to name a few that have mechanics layed off. The best bet is to maintain a job (the bills don't stop coming) andtrying to get the salaries back up to where they need to be when times improve. Don't give the employer a reason to go offshore and replace you.

ha:Pha:Pha:P

Those who would coerce CSRS employees into FERS would be the first to squeal ifFERS employeeswere in turn coerced into "pay banding".

Delphi's Pre-Bankruptcy Trough-Filling Is Odious: Mark Gilbert
Oct. 12 (Bloomberg) -- You're an executive at a company teetering on the edge of bankruptcy. The unions are deaf to your pleas to cut back on pay and benefits for your workers. Your former parent company won't sign that fat check you need to stave off Chapter 11. The end is nigh. What's your key priority?

Duh! Your key priority is to divert as much cash into the managerial pay accounts as possible in the short time remaining before you lose the keys to the executive washroom. Next, ensure your snout is buried as deeply in the trough as the law allows -- especially if the law is poised to shallow that trough.

On Oct. 4, Delphi Corp.'s beleaguered management found time to prepare an 8-K filing for the U.S. Securities and Exchange Commission. Never mind that the company was a day away from the biggest auto-industry bankruptcy in U.S. history. A serious wrong needed righting before the power to right it disappeared.

``After reviewing the various separation programs in place at Delphi it was determined that the service-based separation policy that Delphi had for all salaried employees was not competitive for executives,'' the company said in its filing.

Uh-oh. Whenever you see the words ``executives'' and ``competitive'' in the same sentence, you just know some manager is about to shove his face deep into the compensation pool and start snorting back gobs of cash on the spurious grounds that his peers at the company next door are doing the same.

Supersize Me

``The Compensation Committee of the Board of Directors recently approved certain modifications to the separation policies which apply to executives,'' Delphi said. The Oxford English Dictionary's first definition of ``modify'' is ``to limit, restrain, keep within bounds and measure.'' The reference book notes, though, that such usage is obscure, and goes on to give the Scottish legal definition, ``to assess, decree a payment of money, a fine, costs; to award a payment to a person.''

You won't be surprised to learn that Delphi is using that latter definition. As the future of the company's 185,000 hourly and salaried employees around the world and 34,000 hourly workers in the U.S. hung in the balance, Delphi found the time and money to funnel some more lucre toward its management's bank accounts.

Here's the formula, as detailed in the 8-K filing with the SEC. First, take the executive's base salary. Then throw in the annual target bonus. Divide by 12 to get a monthly figure. ``Such amount shall be paid monthly for an eighteen month period,'' according to Delphi.

What Color's Your Parachute?

So any of Delphi's 21 top executives who lose their jobs as a result of the bankruptcy filing have newly refurbished golden parachutes ready to spring open and soften their falls from grace. Even my tiny brain can calculate that the new structure gives any surplus-to-requirements managers a 50 percent uplift on what they'd have made hanging on to their jobs. The new packages won't apply to Chief Executive Officer Steve Miller.

Retaining managers ``avoids the transaction cost involved in hiring a replacement,'' said Lindsey Williams, a company spokesman, in an e-mailed response to questions. ``If no one is fired, the cost of the program is zero.''

To qualify for the new severance bundle, the managers signed an 18-month agreement ``that basically prohibits them from being hired by anyone else in the industry,'' he wrote.

The company also plans to spend as much as $88 million on bonuses for about 486 U.S.-based executives, funding cash payments worth 30 percent to 250 percent of their base salaries.

Value Destruction

Delphi shareholders, who've seen the value of their shares fall by 97 percent this year as the stock plunged to about 25 cents from $8.83, will no doubt be relieved that the geniuses who presided over that destruction are protected from the aftershocks of their ineptitude.

``Once again, we see the disgusting spectacle of the people at the top taking care of themselves at the same time they are demanding extraordinary sacrifices from their hourly workers, engineers, administrative and support staff, mid-level managers and others,'' said Ron Gettelfinger, president of the United Auto Workers union, in a statement on the day of Delphi's bankruptcy.

Rewriting those separation contracts became a matter of some urgency to Delphi's chiefs as the need to seek protection from creditors loomed large. U.S. bankruptcy law will change on Oct. 17. As well as setting an 18-month limit on how long a company can dither over its reorganization, the new rules also restrict how much moolah the gang at head office can hand themselves to no more than 10 times the average worker's pay.

Racing Into Bankruptcy

The 20 percent increase in U.S. bankruptcies in the third quarter compared with the second, as noted by Bloomberg reporter Tom Becker, couldn't be down to greedy business folk stuffing their pockets before the new regulations curb their enthusiasm for self- enrichment, could it?

Delphi CEO Miller says General Motors Corp., the world's biggest automaker, will also have to file for bankruptcy if it fails to better his efforts to wring concessions out of its unions. Ronald Tadross, an analyst at Banc of America Securities in New York, said this week he sees a 30 percent chance of GM going bust, up from 10 percent prior to Delphi's filing.

So keep an eye on GM's filings with the SEC. If the company starts lining the executive parachutes with gold in the coming week, before the new U.S. laws come into force, you'll know bankruptcy can't be far away.

I kind of like the discussion here. I think that two tier pay has not worked well in most places. It sets up a natural (unnatural?) tension between two groups and as the older group's powers fade so often fade their fortunes.But given enough time, the CSRS-FERS problem will go away as CSRS will simply disappear. I am under CSRS and I like it more than FERS. When FERS came out I could have transferred. I paid for a study which said I would be slightly better off transferring to FERS. I think that worked out to be a true analysis. (I did not change over not based on the numbers but because I did not trust my employeer, imagine that!) I got a decent grade early and have made max contributions to the TSP so FERS is OK under that scenario. But I have less risk. Say the proposition is in retirement annually I could get $55k CSRS or $60K FERS only maybe there might be a problem in the market and I might get less that $50K from FERS. well, I would avoid the risk and go with CSRS.Now where CSRS used to be a huge advantage one place I worked was the old boys (and gals these days) took care of those nearing retirement by getting them promoted in their last few years, to build up the retirement. No one complained as they were looking for that consideration themself later on. In that sense FERS is a better management structure at least to me as senority is OK but not an optimal approach to management.Â*Anyway, maybe I'll get lucky and my original aversionÂ* to risk will work out as CSRS slowly fades away with me still covered.