A Tale of Two SECs: Chair White Moves Towards Two-Class Pay and Benefits System Favoring Management Employees, and Announces New Management-Only Retirement and Other Perks
In a move that will have a significant, long-term impact on the SEC's culture, SEC Chair Mary Jo White appears to be moving the SEC further towards a two-class pay and benefits system that provides SEC managers with bigger raises, better retirement benefits and more perquisites. In September, Chair White announced at a managers-only town hall meeting that the agency will be providing several special new perquisites to managers only this fall:
- Additional Supplemental Retirement Match of 3% (Frontline Staff Will Receive 1%)
- A $500 Annual Reimbursement for Professional Dues (Frontline Staff Will Receive $400)
- Accrual of 8 Hours of Annual Leave per Pay Period upon Entry into Management (Frontline Staff Must Have 15 Years of Service to Accrue 8)
- Carry Over of up to 360 Hours of Annual Leave from Year to Year (Frontline Staff Accrue 240 Hours)
These special management perks will not be provided to the frontline staff at the agency, although they comprise the vast majority of the SEC’s employees. The Union has long advocated for a unified pay and benefits system. In fact, until recently, management agreed with the Union's view that creating two classes of pay systems would be divisive, lower morale and eventually impact the SEC's ability to meet its mission. But that has changed. Needless to say, the Union has communicated to the Chair its profound disappointment that SEC management is pursuing this divisive policy of providing special perks to managers only. The Union made it clear that this policy will prove to be extremely harmful to collaboration, teamwork and staff morale at the SEC – an agency that already has well documented morale problems.
In a brief call to the Union prior to the announcement, management reported that these perks were being provided to managers primarily because “they work very hard” and their morale is so low that some of them may leave management. The Union pointed out that the frontline staff who perform most of the actual work of the SEC also work very hard and also have very low morale, as is evidenced by repeatedly low Federal Employee Viewpoint Survey results over the last few years. Nevertheless, management believes that the best way to show SEC managers that they are truly valued and appreciated is to give them extremely generous new perks that are not available to non-managers.
This questionable new management perk policy comes on the heels of the SEC’s decision earlier this year to provide much larger percentage raises to SEC managers than to the frontline staff that they manage. Indeed, late this spring, OHR announced that managers who received a “4” rating would get a 4% raise, and those who received a “5” rating would get a 6% raise. These huge raises were substantially higher than the 3% raise provided to the frontline staff working in the trenches. Management justified these much higher rewards by awarding themselves inflated grades under the highly subjective performance management system that they created, with the vast majority, 72% in all, receiving the highest ratings of “4” or “5” justifying the big payouts. Simultaneously, management gave the majority of the employees that they manage a “2” or a “3,” raising serious questions about how the managers could be “managing” so well when the people they are managing are supposedly doing so poorly. See a prior report on these inflated management ratings here.
Each of the new management perks have angered frontline staff, for a number of reasons:
- 3% Supplemental Retirement Match: The new special manager retirement match is particularly insulting to the frontline staff because the SEC has been blocking the supplemental retirement benefit provided for in the Pay Parity legislation over a decade ago. Management refused to provide this benefit for years, falsely claiming that the agency could not legally provide it. Finally, this year, management grudgingly agreed to provide a 1% supplemental match to the frontline staff, which they still have failed to implement. Now, on the shoulders of the Union’s years of hard work, management has decided to give themselves a 3% match, even as they continue to fail to provide the frontline 1% match in the ongoing compensation negotiations with the Union. See a more detailed report on the history of the SEC’s refusal to provide a supplemental retirement match here.
There is simply no evidence that management needs a higher retirement match than frontline employees. Indeed, managers already make more money than the frontline staff, so their existing match is already larger. And they already benefit from the ability to go through the “revolving door” to score much better compensation packages in the private sector when they leave the SEC. And, given the limited overall compensation pie at the SEC, this enhanced benefit may unfairly limit what the agency will be willing to provide in benefits to the frontline employees. It is probably for all of these reasons, as well as because it would be damaging to morale, that the Union is aware of no other FIRREA agency that has adopted the foolhardy policy of differentiating retirement match percentages in this fashion.
In fact, it is often illegal to differentiate retirement matches in this fashion in the private sector, because it would discourage companies from supporting the retirement investments of their lower compensated employees. The Union is currently examining the question of whether it is, in fact, illegal for the SEC to adopt this policy. Whether or not it is illegal, however, it is unquestionably bad policy for the SEC to engage in behavior that would be illegal for many of the companies that it regulates.
Legal considerations notwithstanding, the overarching message being communicated by SEC management is a completely tone deaf one: that, due to their “hard work,” SEC managers are entitled to a more secure retirement than the frontline staff who work for them.
- $500 Dues Reimbursement: Over the past two years, the Union has fought for implementation of professional dues reimbursement at the SEC in its CBA negotiations. As with the supplemental retirement match proposal, SEC management persistently fought the Union, arguing that no SEC employee should receive this benefit that is commonplace in the private sector and available in other FIRREA agencies. Management capitulated only after the Union had won the support of the Federal Service Impasses Panel’s factfinder, and it had become clear that an adverse FSIP decision would surely follow. Now, after arguing against this proposal for two years, management has decided to give itself a higher rate of reimbursement than the frontline staff who fought for the benefit in the first place.
As with the retirement match, there is no evidence that managers need to pay higher professional dues than the employees that they manage. In fact, it is the frontline staff who typically need to maintain their professional licenses and certifications because they are doing the frontline work of the Commission. In fact, some managers have allowed certain of their credentials (e.g., Certified Fraud Examiner) to lapse because they no longer need them. It makes little sense to afford less reimbursement to the frontline staff under these circumstances.
- 8-Hour Annual Leave Accrual and 360-Hour Annual Leave Carryover: Typically, a federal employee must have fifteen years of government service to earn 8 hours of annual leave each pay period, and no employee can carryover more than 240 hours, whether you are a low level employee or a manager. According to OPM's website, the type of expanded annual leave benefits the SEC will be giving all managers are typically provided only to very senior executives in the government. With these changes, hardworking frontline staffers, including hundreds of employees in Grade 16, who have served the SEC for 10, 12 or 14 years, will see less experienced managers enjoy much better leave benefits. This policy will cause permanent harm to the esprit de corps at the SEC.
“I am extremely disappointed that the SEC appears to be resolved to create two classes of pay and benefits at the agency, with haves and have nots, which will continue to be extremely divisive and damaging to employee morale,” NTEU Chapter 293 President Greg Gilman noted today. “I believe that, in the federal government, we should compensate our professionals well, both management and frontline staff, and then do everything we can to make them forget about compensation. They should instead be focused like a laser upon performing our important mission together as a team. Simply put, these types of differentiated benefits structures are ill-suited to the public sector work that we do for the American people.”
A two-class pay system will further encourage the "command and control," "top down" management culture at the SEC that undercuts the creativity, autonomy and efficiency of the frontline staff. That the agency would move towards such a policy in the midst of an agency-wide labor-management forum program to boost employee engagement and satisfaction reflects a remarkable lack of sincere interest in that effort. Notwithstanding the forum process, the SEC is simply not listening to its employees. The Union believes that the SEC’s misguided human capital policies will continue to have a corrosive effect upon morale at the agency. The Union does not, however, have bargaining rights over the benefits that are afforded to SEC managers. Nevertheless, we will continue to advocate for benefits parity between management and frontline staff in a manner that uniformly acknowledges the hard work that everyone does at the agency. Furthermore, we will insist upon parity in all aspects of our ongoing compensation negotiations with management.