In this report, RAND researchers examine the Defense Department's methodology for awarding hostile fire pay and imminent danger pay and explore whether a different approach might be more effective.

Presents information about military pay compiled by the Defense Finance and Accounting Service of the U.S. Department of Defense. Discusses pay rates, procedures, and policies.

Imminent Danger Pay: Actions Needed Regarding Pay Designations in the U.S. Central Command Area of Responsibility

Because U.S. military personnel currently receive $225 Hostile Fire Pay/Imminent Danger Pay (HFP/IDP) per month for serving in a combat zone, independent of the level of combat risk, servicemembers who face low levels of risk may be overcompensated. However, because overall compensation must be sufficient to attract volunteers who undertake high levels of risk, it is appropriate to examine the relationship between combat risk and total cash compensation. Using data on enlisted personnel for the period 2003-2009, we estimated that an increase in risk of death of one per thousand personnel was associated with an additional $551 per person in annual compensation. Quadratic estimates reveal that compensation increases in combat risk at a decreasing rate, even when the model is estimated separately for individuals who should have similar preferences toward combat risk. However, when the relationship between compensation and risk was estimated using data only on combat zone observations, the relationship was smaller, statistically less precise, and often negative.