USPS to Offer Senior Managers Additional Pay Incentives

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The U.S. Postal Service may give its senior managers additional pay incentives of up to 25 percent later this year, even though the agency is expected to lose $1 billion or more this year and seek a substantial rate increase in October.

In a letter to about 900 top postal executives earlier this month, postmaster general Jack Potter said that if the USPS continues to increase productivity this year, managers' bonuses could amount to a quarter of their salaries.

The bonus program -- known as the Economic Value Added Variable Pay Program -- is based on total factor productivity, the USPS' most complete measure of productivity, among other factors.

Potter said the USPS has "reduced work hours ... and achieved additional total factor productivity gains of 2 percent," he said. The agency "has made great progress this year in a very difficult business environment with challenging goals," he said.

Postal critics say the agency's EVA program could allow postal managers to become eligible for substantial bonuses even if the agency falls short of the productivity gains needed for the agency to be financially sound.

Charles Guy, adjunct fellow at the Lexington Institute and a former executive at the USPS, said the postal service has set a 0.7 percent TFP increase to make managers eligible for substantial bonuses, "but the data accompanying its request for a rate increase for fiscal year 2001 and its operating budget for the year indicate it would require a substantially higher, 2 percent or more TFP for the service to break even."

Guy said the EVA program became an issue earlier this year when it was revealed that management received $280 million in these performance bonuses last fiscal year, when the USPS lost $199 million.

In addition, Guy said, the EVA index used to determine eligibility for management bonuses, initiated in the mid-1990s, included net income as a major component while TFP was omitted.

"This year, however, with negative net income a certainty but with TFP expected to rise, the EVA index reportedly will ignore net income in favor of this low increase in TFP," Guy said.


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