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Washington—The National Treasury Employees Union (NTEU) and the Federal Deposit Insurance Corporation (FDIC) have agreed to suspend payments under the FDIC’s existing pay-for-performance system covering employees in the 2007 performance cycle while the parties review options for a more transparent, credible and fair system going forward.

In its place for 2007, employees with a performance management program summary rating of “meets expectations” will receive an across-the-board 3.75 percent basic pay adjustment, plus 0.75 percent of basic pay in a lump-sum payment.

The agency’s pay-for-performance system has generated broad criticism among FDIC employees, and, as reflected in a recent FDIC employee survey, was having a detrimental impact on morale and teamwork at this important federal financial regulatory agency.

NTEU President Colleen M. Kelley and FDIC Chair Sheila Bair held a series of discussion about ways to address employee concerns reflected in the survey and reached an interim agreement on the 2008 payouts until more extensive changes could be discussed.

“FDIC employees have spoken loudly and clearly about their dissatisfaction with the current system, a dissatisfaction NTEU shared in bargaining over this program and its predecessor,” said NTEU President Colleen M. Kelley. “I am pleased that we were able to provide employees with some relief.”

The interim solution eliminates the group assignments which were not viewed as an accurate or fair reflection of employee performance, takes away the subjective contribution factors and eliminates favoritism in awarding pay increases.

The NTEU leader welcomed Bair’s “willingness to work with NTEU to address this immediate concern” and the fact that “she demonstrated a genuine sincerity to listen to the voices of employees.”

In the survey, conducted by the Hay Group, an outside company, only 12 percent of FDIC employees said they found the now-suspended system to be a fair program for rewarding employees’ performance and contributions. Fewer than one in three said they believed the pay-for-performance group assignments—which were key to determining pay—were an accurate reflection of performance and contribution.

The survey report was distributed to FDIC employees on Friday.

The Hay Group reported that employees felt there was weak linkage between employee performance and pay raises; that special assignments, details, projects and relationships with supervisors had the biggest impact on pay group assignments; and that the pay-for-performance program was having a negative impact on motivation and teamwork.

Fully 57 percent of employee-respondents called for elimination of the group assignments, while 44 percent recommended changing the arbitrary percentage of employees who could be assigned to each group. Nearly another quarter pushed for more impact on pay-for-performance ratings by their immediate supervisors.

Kelley said NTEU “has a number of possible options to present as we look to the future based on our experience at the FDIC and other agencies about what works and what does not.”

NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.