ALLOWANCES AND DIFFERENTIALS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP59-00224A000100690035-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 18
• Document Creation Date: December 9, 2016
• Document Release Date: August 25, 2000
• Sequence Number: 35
• Publication Date: June 14, 1955
• Content Type: REPORT

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June lu, 1955
ALLOWANCES AND DIFFERENTIALS
The President in his January 11, 1955 message to the Congress on
personnel matters, commented on the need for improvements in certain con-
ditions affecting all U. S. citizens employed overseas, and listed allow-
ances among those subjects requiring attention.
Currently three major systems of allowances are applicable to American
citizen civilian personnel stationed outside the continental United States:
(1) Foreign area allowances, payable to personnel stationed
in foreign countries;
(2) Territorial allowances, payable to personnel stationed
in the Territories and possessions of the United States;
and
(3) Maximum twenty-five percent salary differential payable
to personnel stationed in the Canal Zone.
Overseas allowance and differential practices vary among the three
systems, among agencies, and among pay groups (for example, the Classification
Act and wage-board groups). Some of the differences are warranted by differ-
ences in circumstances, others are not.
With respect to civilian allowances, substantially greater uniformity
can be achieved as regards personnel stationed in foreign areas and Terri-
tories and possessions, respectively.
Significant progress has been made in recent years in the direction of
standardization of the allu.:rance program for "white collar" civilian personnel
stationed in foreign areas. Certain basic problems-in addition to those
arising from the existence of the several different systems-exist as de-
terrents to the most effective development of the system on a uniform and
ecuitable bases:
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a. Legislative authority for certain aspects of the program has
not been provided on a permanent basis but must be renewed
annually;
b. Authority for the payment of some items is granted only to
certain agencies;
c. "Loop-hole" provisions in legislation grant certain agencies
authority to make exceptions to the standardized system;
During recent gears substantial progress has also been made toward a
coordinated system of additional compensation for Federal employees stationed
in territorial areas. A major problem requiring legislative action results
from the existing statutory provision- that total additional compensation in
territorial areas may not exceed 25% of the rates of basic compensation.
It is the consensus of major departments and agencies that a single
statute, consolidating existing authority for the payment of allowances and
differentials for civilian personnel and correcting certain inequities that
now exist is highly desirable.
Accordingly, we are submitting at this time a proposed draft of a bill
on overseas allowances and differentials, short-titled the "Overseas Allc?,T-
ances Act of 1955?"
The proposed bill is based on the principle that the Government should
compensate Federal employees overseas (a) for additional expenses associated
with overseas service not incurred, or not incurred on a comparable scale,
by Federal employees in the States, and (b) for differences in conditions of
environment at overseas posts that necessitate additional compensation as
a recruitment and retention incentive.
Fundamentally the proposed bill:
a. Codifies in one act various provisions of law now found in numerous
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separate statutes, in order to provide a single continuing authority,
uniform for all agencies, for allowances and differentials,
b. Brings about uniformity in overseas allowances and differentials
to the extent consistent with conditions. It eliminates unwarranted
differences between the territorial and foreign systems; permits
extension of allowances and differentials to employees whose rates
of pay are fixed administratively, mainly the wage-board group;
and eliminates the many differences that now exist between
agencies using the Foreign Service Act
authority and other Federal agencies in foreign areas.
c. Provides a basis for the more efficient and equitable administration
of allowances and differentials,
d. Meets the major problem of allowances in territorial areas by elimi-
nating the statutory 25 percent ceiling on total additional com-
pensation.
General provisions of proposed bill
The proposed bill provides two coordinated systems of allowances and
differentials, one for foreign duty and the other for service in territorial
areas. Substantial differences exist between conditions of employment at
foreign posts and in territorial areas of the United States. No agency has
shown a need, for example, for an education allow^!ance, or a transfer allow-
ance, or a separate maintenance allowance in territorial :areas, Certain
needs at foreign posts are associated with the function of representing the
United States. There is no bads in territorial areas for expenditures
paralleling the representation expenditures in foreign
areas.
Further, one basic difference between territorial and foreign areas
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must be taken into account in all allowance and differential matters. In
contrast with conditions at foreign posts, local residents in most terri-
torial areas are United States citizens. An allowance and differential
system for territorial areas must fit the needs of United States citizen
employees recruited locally as well as those recruited from the mainland, and
must avoid unwarranted distinctions between the two groups..
Because of various special conditions affecting employment in the Canal
Zone, the bill does not change the present practice in that area. However,
provision is made to extend coverage of the Act, by Executive Order, to the
Canal Zone, either as a foreign area or territory, should it be found appro-
priate at some future date.
Conditions in the Trust Territory seem more similar to those in rela-
tively undeveloped foreign areas than those in a United States territory
Although Guam, which is a U. S. territorial area and. will continue to be
treated as such, is surrounded by the Trust Territory, the agencies with
most employees on the island do not feel that payment of foreign all.~avances
in the Trust Territory, as proposed in the draft bill, will create problems
on Guam.
Other general provisions of the bill provide for central coordination
through regulations to be issued by the President, and authorize payment of
allowances to employees whose rates of pay are fixed administratively. At
present, foreign allowances may be gr?inted to wage-board and other employees
whose rates of pay are fixed administratively. They are not eligible, however,
for the foreign post differential, territorial cost-of-living allowance, or
territorial post differential.. As a consequence, agencies commonly incorpo-
rate amounts equivalent to post differentials and territorial cost-of-living
allowances into wage rates. Including such amounts in base pay distorts
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retirement, overtime, and other payments.
The proposed draft bill authorizes extension of overseas allowances
and differentials to such employees only if their wages are set at rates
which do not consider allowances or differential and correspond to rates
paid in the States. This avoids the possible duplication of benefits that
would exist if, for example, agencies set wage-board rates on the basis of
exceptionally high rates prevailing in an overseas area, as in parts of
Alaska, and, in addition, paid the employees concerned cost-of-living allow-
ances basod on high costs in the area. The proposed bill dos not prevent
fixing pay rates for wage- board employees in accordance with rates prevailing
in an overseas locality, however, as an alternative to payment of allowances
and differentials.
Foreign Quarters Allowances
The Act of June 26, 1930, first provided permanent statutory authority
to all Federal agencies to furnish living quarters-including heat, fuel,
and light--in Government-owned or rented buildings to civilian officers and
employees stationed in foreign countries without cost to them. Where quarters
were not available, agencies were authorized to grant allowances in lieu of
quarters. It was anticipated at the time of passage of this legislation
that an expanded Government housing program aould, in time, provide quarters
for all, or most personnel stationed overseas. This goal has not been pos-
sible of accomplishment.
During the ensuing 25 years, the quarters allowance has become an
accepted aspect of the allowance structure for service in foreign areas. The
Government has found it advantageous to provide either Government housing or
quarters allowances in lieu thereof in order that employees may be able to
carry out their official duties properly regardless of housing shortages and
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relevant adverse conditions and in order that they may appear locally
representative of American standards of living, efficiency, and activity,
The proposed bill continues the foreign living-quarters allowance,
which compensates employees for the cost of their permanent quarters at a
post, and adds water to the utilities payable by the Government.
The proposed bill extends to all agencies authority for payment of the
temporary lodging allowance. This allowance is now available only to agencies
authorized to use the Foreign Service Act provisions, yet the same need
exists in other agencies.
Temporary lodging allowances are intended to cover employeesi hotel
room expenses on first arrival at a foreign post, while looking for suitable
quarters and awaiting arrival of furniture. The proposed language also per-
mits payment of such allowance under the very similar conditions that exist
immediately prior to an employee's departure from the post, when he must
relinquish his lease or pay for a period beyond his departure date. General-
ly, the employee moves to a hotel for a short period to allow himself time
to complete his departure arrangements, such as settlement of utility bills
and preparation of furniture and effects for storage or shipment.
The proposed language omits the present restriction of this allowance
to the amount of per diem that would be allowable if the employee and his
family were in a travel status. There are two reasons for this change.
First, this restriction would not operate uniformly among departments. Em-
ployees under the Forein Service Act are allowed per diem for the employee
and for each member of his family, but no per diem is authorized for members
of the family of most other departments. Second, the temporary lodging
allowance is not intended to cover the same kinds of expenditures that are
the basis for per diem payments. This allowance relates only to the cost
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of quarters (in this instance, hotel rooms) and does not reflect expend'itees
for meals, which are considered in per diem.
Very sparing application is envisaged for the new authority for repairs
and alterations. This is not intended to pay for such normal expenditures
on establishment of a new residence as minor alterations and redecorating.
At primitive posts or at posts where all acceptable housing is occupied,
employees have at times been forced to make heavy personal outlays for es-
sential improvements to substandard dwellings, such as installation of
plumbing or electric wiring. No specific legislative authority has hitherto
existed for their relief. The proposed bill provides authority for payment
or reimbursement of actual and necessary expenses for repairs and alterations
of this type.
Foreign cost-of-living allowances
Foreign cost-of-living allowances compensate an employee for the excess
cost of living at a foreign post where living costs (except rent and utilities.?
covered by quarters allowances) are higher than in .iashington, D. C.; for
initial outfitting costs on being transferred to a station where, for ex-
ample, a different type of clothing or electrical equipment of a different
voltage is required; and for the cost of maintaining a separate establishment
when conditions at his post require him to leave his family elsewhere.
The principal change in existing cost-of-living allowances is the appli-
cation of a transfer allowance upon an employee's assignment to a post in
the United States between foreign assignments. In career service, a transfer
back to the United States is just another in a series of transfers. The un-
usual expenses incident thereto may be as great or greater than similar costs
incurred in transferring between posts abroad. In the case of employees of
long years of service, a transfer to the United States adds that much more to
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the total out-of-pocket expenditure incident to the mobile nature of their
employment.
The Congress recognized the need for such allowance in its recent en-
actment of P.L. 22 - 814th Congress, amending the Foreign Service Act of 19146,
including authority for payment of this allowance under the same conditions
specified in the proposed legislation. Since the general authority for pay-
ment of cost-of-living allowances by other agencies of the Government is
contained in Appropriation Acts, renewed annually, and based on the section
of the Foreign Service Act which has been amended, this sane authority is now
available to all agencies. In practice this authority will be used principal-
ly by the Foreign Service of the Department of State, but to the extent that
similar conditions of service apply, it is appropriate that the permanent
authority be available to other agencies for their employees.
another change in existing cost-of-living allowances concerns the
separate maintenance allowance. This allowance is designed to assist an
employee in meeting the duplication of expenses caused when he is required
to live at a post and maintain his family elsewhere. The proposed language
substitutes "post of assignment" for the existing phrase "country of assign-
ment," and provides the more accurate designation of "separate maintenance
allowance". In some cases, it is not essential that the employee send his
family outside the country. H pothetically, an employee stationed in Bombay
might send his family away in time of protracted rioting and violence
follo-:1red by plague. New Delhi might be safe, but in order to qualify for a
separate maintenance allowance under existing legislation, the employee
would have to send his family out of India.
One new type of cost-of-living payment is provided, an education allow-
ance and related travel expenses, to help employees overseas meet additional
costs of educating; their children. Until recently, civilian employees of the
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Government in foreign areas were faced with two variables beyond their con-
trol, with respect to the problem of educating their minor children: (1) the
employee may or may not have been eligible for financial or other assistance,
depending upon the agency for which he worked or the area of his assignment;
(2) he may or may not have been stationed where there were suitable schools
to which he could send his children at his own expense.
Civilian employees of the Defense agencies who are stationed overseas
are eligible for the following assistance in the education of their minor
children: (1) free attendance at schools operated by the armed services, or
(2) the cost of correspondence courses up to the maximum average permitted by
the appropriation, $235, (P.L. 458, 83rd Cong., Sec. 709) or (3) tuition fees
at suitable local schools up to a maximum of $235, and (4) free "space availa-
ble" travel on Government vessels or aircraft tu or from the United States
for the purpose of attending school for one round trip per year. These
benefits parallel those authorized for military personnel (Air Force Regu-
lation No. 34-50; Army Regulations No. 350-950-1; Navy Regulation No. 7820).
Employees of all civilian agencies are required to pay tuition when they
enroll their children in Defense-operated schools.
There are employees of other civilian agencies, stationed overseas, who
receive assistance for education of their dependents. The Panama Canal
Government under annual appropriation acts receives funds with which to main-
tain schools authorized by Section 5, Title II, Canal Zone as amended
by Section 1, Act of September 26, 1950 (P.L. 841, 81st Crag). Reimburse-
ments for attendance by dependents of employees of other agencies, except
the Panama Canal Company, are authorized in Section 105, P.L. 453, 83rd Cong.
The Foreign Operations Administration, under authority in Section 411(b) of
P.L. 665, 83rd Cong., pays for education of dependents of employees of that
agency at several posts.
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The present Congress recognized the necessity for extending authority
for providing Government assistance in the education of dependents of em-
ployees abroad by adding to the cost-of-living allowances provisions of the
Foreign Service Act authority for payment of education allowances. This
authority is made available to other agencies of the Government under the
General Provisions of the Supplemental Appropriation Act, which authorizes
for all agencies the cost-of-living allowances of the Foreign Service Act..
The language of the proposed legislation is substantially the same as that in
P.L. 22 - 84th Congress amending the Foreign Service Act, except that
authority is included to make advance payments..
Another aspect of this problem is that many employees in foreign areas
are troubled by the possibility that their children may become expatriates
by virtue of continued residence abroad. The importance of spending part
of the adolescent years in this country has been recognized by the Congress
in another connection. Section 201(g) of the Act of October 14, 1940)
"Nationality Act of 1940" (P.L.;853,. 76th Congress), states in effect that
a child born abroad of an American citizen and an alien is an American
citizen provided he resides in the United States or its outlying possessions
for a period or periods totaling 5 years between the ages of 13 and 21, such
residences to begin not later than age 16. While this legislation does not
apply to children of Government employees, it is cited as evidence of the
importance which has been attached to a period of residence in the United
States, during their formative years, by children normally living abroad..
To meet this problem, we recommend that authority be granted to pay
the transportation costs of dependents to and from the nearest port of entry
in the continental United States, not to exceed one round trip, for the pur-
pose of securing an American secondary school education..
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Afhen a round trip to the United States for the purpose of securing
secondary school education is provided, the education allowance is not paid.
The ;,arents of children of high school age are thus given a choice of three
kinds of assistance: (1) sending them away to a foreign school, where neces-
sary, and receiving any applicable allowance, or (2) having them returned to
the United States', at Government expense, with no allowance payable, or
(3) sending them to the United States at their own expense and receiving an
allowance to assist with their maintenance expense in this country.
In the United States, a majority of parents send their children to near-
by colleges or universities; in contrast, overseas personnel are faced with
the significant added expense of sending their children long distances in
order to enroll them in American colleges or universities. We recoend
that a least a part of this expense be offset by defraying the expense of
one round trip to the United States for the purpose of securing an under-
graduate college education. Tuition, room, and board would not, of course,
be paid in such instances.
In P.L. 22 - 84th Congress, amending the Foreign Service Act, Congress
provided these travel authorities for educational purposes. However, these
are available only to those agencies authorized to exercise authorities of
the Foreign Service Act and do not apply to other agencies operating in
foreign areas. The proposed legislation provides authority similar to that
now contained in the Foreign Service Act.
Representation Expenses
The proposed bill includes an amendment to the Administrative Expenses
Act of 19116, P.L. 600, 79th Congress, to provide general authority in place
of existing scattered authorities to permit use of administrative expenses
funds for representation purposes in the promotion of official policies and
programs.
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Such expenses are associated with the function of representing the
United States in a foreign country and raining acceptance for its policies
and programs. The direct official approach to discussion and negotiation
generally preferred by Americans is not understood in many foreign areas.
Such impersonal tactics, unembellished by gestures of a social nature, not
only may not be productive of response and cooperation but may even arouse
antagonism and distrust. Informal social contact is often the key to results.
T -iorecver, the nature of our entertainment is often used by others as
a yardstick for judging our national prestige. Stinting too much in this
respect might lead to invidious comparison of the United States with other
great powers. There are also official acts of courtesy which are mandatory
for our principal representatives abroad, such as the purchase of flowers or
similar tokens when important local personages marry or die and the purc`ase
of memorial wreaths for public monuments on national holidays.
It is not expected that more than a few agencies will require this
allowance. The Department of State is the principal agency discharging
representational functions., However, the interests of the United Sates
can be furthered on occasiort by granting similar authority to other agencies,
for example, the director of a progri.m of assistance in a foreign country.
For this reason, general authority for payment of such expenses appears
desirable. Use of this authority will be prescribed by regulations issued
by the President.
Storage Expenses
The proposed bill extends authority for payment of storage expenses,
now available primarily to agencies under the Foreign Service Act, to Federal
agencies generally. It provides for amendment of existing statutes (Sec.
911(10 and (5) P.L. 7211, 79th Conga and Title I P.L. 195, 83rd Long..) but
retains the current bases for payment. In addition, it specifically
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authorizes payments when storage would avoid the cost of transporting effects
from one location to another.
This provision relieves the employee of the personal ex.-Dense for storage
when conditions at his post of assignment or the nature of his job, both
beyond his control, preclude his using his effects. Expenses for storage
occur during:
(1)
the employee's occupancy of hotel rooms, or other temporary
quarters, on first arrival at a new post while he is locating
permanent quarters;
(2) the employee's occupancy of furnished quarters, either pro-
(3)
(4)
vided by the Government or privately leased (in some areas,
unfurnished private quarters are not available);
emergency conditions such as chronic civil disturbance or
continued hostility at the post toward kmericans which may
necessitate evacuation of personnel; strikes, blockades,
lack of transportation facilities, etc. at the post or in
transit which preclude safe or prompt transportation of
effects;
official travel of the employee away from the post (storage'
in such circumstances generally is necessary only when
quarters at the post are relinquished).
Savings to the Government in transportation costs may be realized under
items (2), (3), and (4). They also can result from storing rather than
transporting the furniture and effects of an employee who, for personal
reasons, prefers not to take them with him.. Many unpredictable factors,
however, would affect potential savings or cost, such as length of time
effects remain in storage vs. distance between successive posts of assign-
ment, necessity to store effects where located in areas char .inT
,61660-5-1
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than those in the United States, etc.. Nevertheless, and des.,-Ate the un-
certainty of ultimate savin,s or cost, it is only equitable that the Govern-
ment assume storage costs incident to the nature and location of the job to
be performed on its behalf.
Official Residence Expenses
Although covering different expenses, this provision is similar to the
representation authority in a number of respects. The Department of State
has been and will remain the principal user, but other agencies on occasion
have need of it. Its payment by the Foreign Operations Administration is
now permitted. Consequently, general authority for such expenses appears
desirable, subject to regulations of the President.
Top officials abroad, State Department and other, are compelled to
maintain residences on a scale which would not be necessary except for the
position of conspicuous responsibility which they occupy at the post. As
principal representatives of the United States, they are persons of major
importance locally and must maintain contact with and entertain the highest
level of local officials, residents, and visitors. Apart from the physical
need for a larger establishment, the factor of national prestige is important
for furtherance of the interests of the United States..
This authority will not permit reimbursement to an individual for the
ordinary household expenses he would incur in any case. It is intended to
defray only the extra expense of keeping up a residence commensurate with the
position of an important representative of the United States abroad. These
expenses include salaries and subsistence of extra servants and costs of up-
keep and repair of a larger and more elaborate residence than would otherwise
be required.
As compared with the State Department's existing authority for payment
of such expenses for a sin le chief renreseritative of the United States at
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any post, the proposed language permits payment to this country's chief
representatives at a post. The new language permits payment of residence
ex_-.enses for the deputy chiefs of the largest missions abroad, for example.
Residence requirements of deputy chiefs of such missions may exceed those of
the chiefs of missions at smaller posts.
Foreign Post Differential
The proposed bill consolidates the two major authorities for foreign
post differentials, one for the Foreign Service and one for all other agencies.
The post differential compensates employees for undesirable conditions
of environment which exist at some foreign posts, such as difficult living
conditions, physical hardships, and hazards to iealth. Thus it serves as an
incentive in recruiting and retaining e rsonnel for such locations. The rate
payable in any instance may not exceed 25 percent of an employee's rate of
basic compensation. language used in the proposed bill to authorize payment
of post differentials continues the statutory language now applicable to
Federal employees generally rather than adopting the statutory provisions
currently applicable to the much smaller groups of Foreign Service officers
and employees.
Territorial Allowance and Differentials
Territorial cost-of-living allowances and Territorial post differentials
are authorized on the same basis that additional compensation is now author-
ized for Territorial areas by section 207 of the Independent Offices Appro-
priation Act, 1949, as amended, with one significant difference. The new
provisions eliminate the existing 25 percent ceiling on cost-of-living
allowances (and on cost-of-living allowance plus post differential if both
are payable at the same post) but retain a 25 percent maximum rate for post
differentials. This is rarallel to the treatment of foreign cost-of-living
allowances and foreign post differentials under existing law as well as in
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the proposed draft bill.
A serious administrative problem is created in Alaska by the present
statutory limitation of 25 percent on rates of additional compensation
payable in territorial areas. The high level of living costs in the Terri-
tory is shown by a survey of Fairbanks and Anchorage made by the Bureau of
Labor Statistics in 1951. This study showed that prices of goods and services.
including rent, were 40 percent higher in Anchorage and 47 percent higher in
Fairbanks than in Seattle. A survey of the total cost of the standard city
worker's family budget conducted by the Bureau of Labor Statistics in 34
large mainland cities in 1951 resulted in an index of 96 for Seattle with
the District of Columbia as 100. Thus, living costs in Alaska bear nearly
the same relationship to living costs in the District as to living costs in
Seattle.
A new differential - the prevailing rate differential - is proposed for
territorial areas. This is authority to pay to locally recruited employees,
in those areas where prevailing wage rates are higher than statutory rates,
a differential in order to enable Federal agencies to compete on equal terms
with other employers for locally available personnel. Authority is also
provided to permit payment of this differential in lieu of the cost-of-living
and/or post differential payable at such post. There might be locations
where the prevailing rate differential is higher than the combined total of
the allowable cost-of-living allowance and post differential. In such cir-
cumstances it would be essential to pay the prevailing rate differential
to employees recruited outside the territorial area in order to avoid
creating a morale problem.
While there is no separate section under this title covering storage
expenses for employees in the Territories and possessions, such employees
`approve T'ObieRieee n
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areas inasmuch as this authority is proposed as an amendment to the Admir.'_s-
trative Expenses Act of 1946, as amended. Neither that Act nor the proposed
Amendment makes any distinction between foreign areas or territorial areas,.
and the same authorities and regulations will apply to both areas.
To avoid any immediate adverse effects from the proposed provisions
which will limit payment of the cost-of-living allowance to employees re-
cruited outside a territorial area, a savings provision is provided to con-
tinue payment of the allowance for a limited period. Allowance and differen-
tial payments would continue on the current basis until regulations are
issued under this title of the proposed legislation. Any employee recruited
locally who as of the effective date of such regulations is receiving the
cost-of-living allowance would, for a period of one year, continue to be
eligible for allowance payments, if a cost-of-living allowance is provided
for employees recruited outside the area, provided he is continuously em-
ployed in the same territorial area. However, he would not be eligible for
any increases in allowances and, in addition, the amount payable would be
reduced by any amounts received as an increase or increases in basic compensa-
tion. It is further provided that in any area where a prevailing rate dif-
ferential is paid, employees protected under this section will continue to be
paid the allowance for the one-year period unless such differential at least
equals the amount received as a cost-of-living allowance. The purpose of this
provision is to provide an adequate period of notice before withdrawal of the
cost-of-living allowance (unless such allowance is discontinued for all
employees).
Recommendation
We recommend favofable consideration of the proposals incorporated in
the attached draft bill, the Overseas Allowance Act of 1955. We believe that
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the Government overseas irrespective of the agency in which they are employed,
greatly simplifies administration of overseas allowances and differentials,
and facilitates recruitment and retention of competent personnel for the high-
ly important activities of the Government performed outside continental United
States,
Approved For Release 2001/03/01 : CIA-RDP59-00224A000100690035-2