The U.S. Postal Service abolished its controversial bonus program for postal executives and asked management groups to help devise a new compensation system that would become effective in 2004.
Postmaster general John E. Potter announced the end of the bonuses in meetings with management at postal headquarters in Washington this month. The EVA, or economic value added, program was part of a pay-for-performance system covering more than 80,000 postmasters, supervisors and other management employees.
Last year the USPS awarded more than $164.1 million in bonuses despite reporting a $1.7 billion deficit for the 2001 fiscal year. The postal service justified the expenditure, saying that executives were meeting their goals to improve customer service and workforce productivity.
The USPS inspector general had previously questioned an inflation adjustment used in the pay formula, and Congress has repeatedly criticized the plan. A House Appropriations Committee report this month said the program “does not provide the necessary incentives to improve postal performance.” The committee instructed postal officials to re-examine that program and report its decision to the panel by Dec. 31.
A USPS spokesman said Potter would present a new compensation program or a progress report to the committee by that date.
Potter also stressed that more than 70 percent of an EVA reserve fund that represents compensation already earned by employees for the past six years was awarded to employees between 1996 and 2000, when the postal service reported more than $3.5 billion in net income.
Currently, about $300 million remains in the bonus plan account and will be paid to eligible employees in checks this year. Potter said no money had been set aside for bonuses in this fiscal year, and the payout will not affect the postal service's bottom line this year or next because the reserve funds were reported as expenses on financial ledgers in previous years.
Potter said postmasters and management employees will receive merit increases ranging from 3.75 percent to 5.75 percent in fiscal 2002 and from 4 percent to 6 percent in fiscal 2003.