Senior Executive Service (SES) Pay System
Publication Date: October 2005
Publisher(s): Library of Congress. Congressional Research Service
A new pay system for the Senior Executive Service (SES) was established in 2004 by Section 1125 of the FY2004 National Defense Authorization Act (P.L. 108136). This legislative provision capped several years when the Director of the Office of Personnel Management (OPM) had advised federal agencies that they needed to provide more rigorous and realistic ratings of their senior executives. (In FY2002, 69% of career senior executives received the highest rating.) Additionally, certain components of the new system could help resolve the long-standing problem of pay compression within the SES. Key features of the new pay system, which took effect on January 11, 2004, include the elimination of locality pay and annual pay adjustments (which were provided in conjunction with annual adjustments for General Schedule and Executive Schedule employees); the replacement of six pay rates (ES-1 through ES-6) with one broad pay range; an increase in the cap on base pay from Executive Schedule IV (EX-IV) to EX-III; and the addition of a second, higher cap, EX-II, for SES appraisal systems that have been certified by OPM.
The certification process involves, in part, designing and implementing a performance appraisal system that makes meaningful distinctions based on the relative performance of senior executives (or senior-level (SL), or scientific or technical (ST) professionals). With the concurrence of the Office of Management and Budget (OMB), OPM developed a certification regulation, which includes nine criteria agencies must meet in the design and administration of their appraisal systems. Barring any compliance problems that might arise after certification has been awarded, full certification is for two calendar years. Provisional certification for one calendar year is awarded when an appraisal system meets design requirements, but there is insufficient documentation to determine whether implementation meets certification requirements. Certification also determines the cap on aggregate compensation for senior executives and SL and ST employees. For an appraisal system that has not been certified, the cap is EX-I; for an appraisal system that has been certified, the cap is the equivalent of the Vice President's salary. The second, higher cap (Vice President's salary) and the establishment of a certification process were enacted by Section 1322 of the Homeland Security Act of 2002 (P.L. 107-296). (For SL and ST employees, certification does not affect their base pay.)
Some of the issues that might arise with the implementation of the new SES pay system and certification process are how to define "meaningful distinctions," the potential for the politicization of senior executives, and the system's implications for the notion of "rank in person," which is a key feature of the SES. This report will be updated as events warrant.