The Department of Defense released today the first volume of the report of the Tenth Quadrennial Review of Military Compensation (QRMC), which assesses the effectiveness of military pay and benefits in recruiting and retaining a high-quality force.
Every four years, DoD conducts a complete review of compensation principles and concepts for members of the armed forces. The 10th QRMC began in 2006.
DoD will study the recommendation for potential implementation and send selected proposals to Congress as proposed legislation.
The QRMC looked at the following cash compensation areas: pay comparability, special and incentive pays, pay for performance and housing.
The commission recommended adopting a new metric to determine a more realsitic value of military compensation compared to the civilian sector. The previous metric, regular military compensation (RMC), included base pay, basic allowance for housing (BAH), basic allowance for subsistence and federal income tax advantages resulting from non-taxed allowances. The more comprehensive metric, military annual compensation (MAC), would include RMC plus state and FICA tax advantages, the value of avoided out-of-pocket health costs and a measure of the differences in the value of military and civilian retirement.
A basic task of any QRMC is to evaluate the adequacy of compensation. The commission’s findings confirm that member compensation is competitive – members’ MAC meets or exceeds the 80th percentile when compared to their civilian peers of like age and education. The commission recommended setting the 80 percentile as the new standard for pay.
The commission’s findings recommend more service flexibility for managing forces through recruiting and retention authorities. With the services growing in size, more special pays and incentive dollars will be needed to achieve objectives; appropriations are not expected to provide the depth of funding needed. Because special and incentive pays currently account for less than 5 percent of total pay, the services have little flexibility to shape their forces, meet emerging needs, or encourage variable career lengths. The commission findings recommended authorities that allow the services to reap efficiencies by targeting specific special pay and incentives for critical skills and assignments.
The committee examined how to better recognize and reward high performance. The QRMC recommended legislation that would allow the services to adopt constructive credit to reward fast promotees and better facilitate lateral entry into the force – thereby offering a means to provide service members with permanent pay credit for early promotion or experience acquired as a civilian. This proposal gives the services the flexibility with the existing pay table to reward performance and offer competitive compensation to high-quality service members.
Lastly, the QRMC was tasked to assess the rate setting process for BAH, which is set by estimating housing expenditures of civilians with similar incomes to military personnel.
The study recommended reducing the gap between “with” and “without dependent” BAH rates to achieve parity in out-of-pocket expenses. DoD accepted this recommendation and through the National Defense Authorization Act of 2008, set BAH of “without dependents” to a minimum of 75 percent of the “with dependent” BAH rate.
This is the first volume of the study dealing with cash compensation. The second voume dealing with non-cash and deferred compensation will be published later in 2008. The Tenth QRMC is on the Web at