Buyout Questions and Answers
VOLUNTARY SEPARATION INCENTIVE ‘BUYOUT’ QUESTIONS AND ANSWERS
1. Q: What is the anticipated attrition for the next several years?
A: We anticipate that attrition will stay in the 2.5% to 3% range through FY 2000. This attrition rate will not provide the 3400 reduction we need to get from our present 20.900 to our FY 2000 target of 17,500. A more critical problem is that such an attrition rate will require a reduction in force (RIF) or furlough at some Centers to meet outyear targets associated with the FY96 budget. It remains to be seen what impact our actual outyear budgets will have.
2. Q: There will be over 3,000 retirement eligible employees at NASA within the next several years. Therefore, it would seem that natural attrition should take care of this situation. Pleas explain.
A; In past years NASA found that employees typically worked 4 years beyond their eligibility for regular retirement. However, recent experience indicates that people are working even longer. We currently find that fewer than 20% of those eligible retire in a normal year. While the number of retirement eligibles will increase, the number of retirees has already shown signs of slowing, consistent with our overall lower attrition rates. Therefore, even with such a large eligible population, we could not expect enough losses to meet annual employment targets already in place.
Discussions about a RIF lave little impact on retirement eligibles since they have relatively long service and are unlikely to be affected by its negative consequence. We need a significant separation incentive to motivate people who have other employment possibilities or are eligible for an annuity to leave sooner and in greater numbers than previous buyouts. This is crucial to our reducing and rebalancing our workforce.
3. Q: Where is the cost benefit in paying retirement eligibles incentives to retire?
A: The major benefit of a buyout is the multi-year stream of salaries and benefits that are saved. In the first year, a buyout produces a small cost savings if it is done early enough in the fiscal year. In subsequent years, the cost of salary and benefits for all those that take the buyout is avoided. As a result of NASA’s buyout in 1995, we experienced a reduction in salary and benefits of 125M in FY 96. Cost avoidance of this magnitude is necessary if NASA is to meet even the budget marks included in the President’s FY 96 outyear budgets.
Conversely, a RIF would typically impact lower graded employees who are not retirement eligible. Although their salary dollars would be saved in subsequent years, a higher salaried workforce would remain employed, receiving pay and grade retention.
While it is true that retirement eligibles will be leaving at some time in the future, the incentive forces a decision now. Such a decision allows the agency to plan for any remaining downsizing efforts with more certainty.
4. Q: RIFs are used on a regular basis in the private sector, why such an aversion in NASA?
A: although a number of private sector companies use RIF, many of the major private sector organizations use an incentive system similar to the voluntary separation incentive. These organizations, as well as NASA, recognize that RIF causes major disruptions, leads to uncertainty among employees, and curtails if not stops productivity until long after the process is completed.
Those private sector firms who downsize using RIF have more flexibility than the Federal Government. They are not bound by the Federal RIF regulations and can target specific areas or positions for reduction with a minimum of disruption to the rest of the workforce. The Federal RIF regulations tend to affect a larger area, generate more disruption within the workforce and also creates severance pay entitlements as well as administrative costs. Since the buyout tends to attract more senior and higher paid employees, we are better able to predict the result. The loss of these senior employees will translate into a lower overall average age, grade and salary. Another advantage of the buyout is that the impact on diversity is minimized since the more senior population that tends to take the buyout is less diverse than the population as a whole.
5. Q: How can we be assured these incentives are not just a ruse to reward long time employees?
A: We do not intend to offer the buyout to all employees. It will only be offered where we determine that we have excess employees. Since any buyout that we could afford would not be a substitute for a regular income, the group that is most likely to take the buyout is made up of employees who have prospects for other employment or who are eligible for an immediate annuity.
6. Q: What assurances do we have that you will not just pay the incentives and go out and hire more people?
A: The legislation precludes this by reducing the current year staffing on a one for one basis from last year’s actual usage. In addition, out FY 2000 budget and staffing plan call for an FTE level of 17,500 which is more than 3400 below our current levels and much more than we can reduce through normal attrition.
7. Q; Why does NASA warrant special legislation since other agencies are also downsizing?
A: Many of the other agencies that are downsizing may need this as well. However, the Administration was unsuccessful in its effort to get a government-wide legislation. They suggested that those agencies that need the buyout should pursue it on an individual basis.
NASA has an overall downsizing plan that reduces the agency to 17,500 FTE by FY 2000. Although we have made progress toward meeting the overall target ceiling, several field centers and Headquarters will have difficulty meeting their targets through natural attrition. Prudent management dictates that we take all steps necessary to avoid a costly and disruptive reduction in force. A buyout will do this in a cost effective way.
8. Q: The NASA downsizing plan indicates that a RIF is not needed until late in FY 98. If RIF is not necessary until then, why approve legislation at this time?
A: Getting the legislation now allows us more time to solve any workforce sizing problems in a measured and deliberate manner in much the same way that you perform preventative maintenance on your automobile. Otherwise, we will be forced to undergo a RIF planning and implementation for 12-18 months at a time when the agency is facing some extremely complex human space flight endeavors associated with the international space station.
9. Q: How can NASA afford to pay these incentives given its constrained funding profile?
A: We will carefully manage the process so that we stay within requested appropriated funds. These incentives will be offered early enough in the fiscal year so that we can pay all costs including “pay-go” penalties from funds that would have normally paid employee salaries.
Since our only alternative appears to be a RIF, analysis of the comparative costs associated with a RIF versus costs associated with a buyout of this magnitude clearly indicate that the buyout is the least costly venture. A buyout not only amounts to a real cost savings versus the costs associated with a RIF, but also results in immeasurable savings due to productivity, morale and retraining issues which are staggering when agencies are faced with major RIFs.
10. Q: What type of positions do you intend to target for separation incentives?
A: This will vary depending on the needs of each Installation. Some Installations, such as HQ and KSC may elect to offer the incentive to all employees due to substantial reduction requirements over a short period of time. Other installations will likely target the incentives to specific occupational groups and grade levels to correct skills imbalances. In order to ease the number of required separations, we continue to search for opportunities for employees to transition from Installations in which their skills are in excess, to Installations which are experiencing shortages in that employee’s skill area.
11. Q: Has NASA used downsizing tools other than the separation incentives in order to achieve workforce reductions?
A: Yes, in addition to separation incentives NASA has used a variety of other downsizing tools. Since January 1993, we have been under a hiring freeze, with only limited hiring in critical areas. For the past 2 years all NASA Installations have offered an aggressive outplacement assistance program to all permanent employees and their spouses The program includes a number of training modules, assistance in applying for and locating alternative employment, job fairs, counseling, and a variety of other services. We are also encouraging employees to pursue part-time or job share arrangements, trial or phases retirement and leave without pay situations for job search or job trial. Unfortunately the tools which are available to agencies do not attract the number of employees which are needed to meet our reduction goals.
12. Q: How would you plan to control the authority to ensure that your component organizations properly manage the incentive?
A: We have developed an implementation plan which requires each Installation to request authority from NASA Headquarters to utilize the incentive. Their request must include a justification for the use of the authority which is consistent with their program, budgetary, and staffing plans; a description of the categories of employees who will be offered the incentive; the number of separations desired; and the projected dates during which the incentive will be offered.
13. Q: What are the proposed future staffing levels for the field centers, and would RIFs be needed to achieve those numbers?
A: The current and projected staffing levels for each of the field centers have been established consistent with and part of program mission requirements subsequent to the Zero Base Review last spring. Although some Installations, such as DFRC, SSC, and LARC will most likely be able to achieve their reduced levels without a RIF; they will experience and are already experiencing skills imbalance. A RIF could be required at any of these locations due to the skills problem alone. Other Installations will experience difficulty not only in skills imbalances, but also in meeting their new funding and strength levels, without some assistance such as buyout.
