Pentagon spends billions on incentive pay but doesn’t measure what works

Introduction

The Pentagon spent $5.6 billion in 2010 on special pay incentives for active-duty service members, including $1.2 billion for enlistment and re-enlistment bonuses. But the Pentagon has no way of measuring whether it is setting bonus amounts wisely.

DOD allows military branches to offer a bonus to any occupation they have difficulty recruiting or retaining. From 2006 to 2010, the services spent a total of $11 billion for bonuses—52 percent went to the Army, 24 percent to the Navy, 16 percent to the Marine Corps, and 9 percent to the Air Force.

About $4.5 billion of the $11 billion was used for enlistment bonuses and $6.6 billion for re-enlistment bonuses. During this same period, all branches met their enlistment goals and quality, with the exception of the Army in 2006 through 2008.

DOD also uses the pay incentives to help attract and keep high-quality members and fill specialty positions. The Pentagon uses special pay to address shortfalls for jobs that are hazardous or less desirable, and to retain skilled labor. With technical or professional occupations, special pay ensures the salary is similar to those in the civilian sector.

Several research organizations have developed specific methodologies for conducting studies on the cost-effectiveness of bonuses. While DOD believes that determining optimal bonus amounts is important enough to warrant further study, it has no immediate plans to do so, according to the Government Accountability Office.

The services instead rely on recruiting and retention data to determine whether their bonus programs have produced desired results, but this data alone is not sufficient to help ensure that bonus levels are set at the most cost-effective amounts.

“Although determining optimal bonus amounts is challenging, coordination of research efforts to determine the return on investment of DOD’s various programs will become increasingly important as constraints on fiscal resources increase,” the GAO said.

According to GAO, a more organized approach to bonus and incentive pay would give DOD the ability to target special pay to service members it needs most to retain.

The Navy’s average per-person enlistment bonus was higher than all the other services during the last two years. In 2010, the Navy’s average enlistment bonus was $23,957, compared to the Army’s $5,969. According to Navy officials, it needs to retain highly skilled sailors who have undergone extensive training for skills that are marketable in private industry and require arduous missions. Navy SEALs have been sought by private contractors and as a result, their bonuses are higher. Navy’s re-enlistment bonus for 2010 was $32,719.

FAST FACT: The highest average bonus topped out at $36,753 for Marine Corp members re-enlisting in 2009.