Processing of Retroactive Pay
Background
As of September 30, 2022, 92 percent of Postal Service’s 635,250 employees were members of labor organizations (unions), whose terms of employment are covered by collective bargaining agreements (labor contracts). In fiscal year (FY) 2022, three of the eight Postal Service unions ratified new labor contracts, resulting in the Postal Service owing retroactive pay to approximately 394,000 employees. Inconveniences due to prolonged processing of retroactive pay affect employees and directly impact the Postal Service’s relationship with its unions, and its Delivering for America goal of being an “employer of choice” that retains the most capable and diverse employees.
What We Did
Our objective was to assess the United States Postal Service’s processes and systems over retroactive pay. To accomplish our objective, we reviewed timelines for three collective bargaining agreements (labor contracts) from contract ratification to issuing retroactive payments to affected employees.
What We Found
The Postal Service has robust steps to process retroactive pay. However, opportunities exist to improve the timeliness of payments. For the three contracts reviewed, the Postal Service took between eight and eleven months to issue retroactive pay. We found the most significant contributing factors affecting timeliness included the challenges in code development due to the outdated system used to process payroll, competing priorities with scheduled payroll system changes and projects, and the lack of formal policies and procedures. Processing retroactive payments requires coordination among five Postal Service functional areas. Each functional area must work around other existing or unanticipated projects planned for the systems required for processing payroll to reach an agreed upon implementation date. Finally, the Postal Service lacks formal procedures around processing retroactive pay, though functional areas do have processes and responsibilities in place.
Recommendations
We recommended management require the new payroll system be able to execute retroactive pay’s complex processing when assessing, reviewing, and selecting a new vendor, and document procedures that include responsibilities for functional areas involved in the process, scheduling guidelines, and timeframes to implement contract requirements.