New Compensation System for Military Reserve Members Would Be Similar to Active Duty Pay System

For Release

June 28, 2012

A new pay structure proposed for members of the U.S. military reserves would be more similar to that of active duty members, cost less than the current system and would not adversely affect recruitment and retention, according to a new study from the RAND Corporation.

"We found the new approach could help the military maintain the current size of the reserve force at the same or even a lower cost than under current policy," said Michael Mattock, lead author of the study and an economist with RAND, a nonprofit research organization.

He said the new system for reserve members would be at least as fair as the current system because it would pay reserve members in the same manner as active service members. In addition, it would make it easier for active duty members to transition to the reserves without having to learn a whole new pay system.

Federal law mandates the Secretary of Defense conduct an assessment of the military compensation system every four years, a process called the Quadrennial Review. The 11th Quadrennial Review of Military Compensation focuses on four broad areas, including the compensation and benefits for members of the military reserve.

The review is proposing a "total force" approach to compensating reservists where their pay is more closely aligned with the approach used to pay active duty members.

The total force compensation approach initially would reduce reserve pay, but make up for it by allowing reserve members who qualify to claim retirement benefits earlier than age 60, and by providing supplemental compensation, such as incentive pay. Because the package changes the level and structure of reserve compensation, military leaders asked RAND to assess the impact of the approach on reserve participation, retention and cost.

The RAND study found that the total force compensation approach is cost effective when the supplemental pay takes the form of either a flat incentive pay or a targeted flat incentive pay. This approach moves reserve pay closer in structure to active duty members by paying reserve members for each day of duty using the same formula as the active members have, and allows reserve members the opportunity to begin receiving retirement benefits sooner.

"Using this new approach, the service branches also can use various incentive pay categories to improve retention in jobs with particular skill sets or high-demand categories," Mattock said.

The study, "Reserve Participation and Cost Under a New Approach to Reserve Compensation," can be found at Other authors of the study are James Hosek and Beth Asch.

Research for the study was sponsored by the 11th Quadrennial Review of Military Compensation and conducted with the Forces and Resources Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Navy, the Marine Corps, the defense agencies and the defense intelligence community.

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