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Who Decides General Schedule Pay Rates?

Created: February 29, 2016 Last Modified: December 18, 2017

Each December, thousands of federal employees wait eagerly to hear if there will be a raise in the coming year. But who decides what the raise will be? Does the president just make it up? And what about locality adjustments -- who sets those? Continue reading below to find out.

The Federal Employees Pay Comparability Act (FEPCA) of 1990 brought a major overhaul to the General Schedule Pay Scale. The law sought to address the growing pay gap between federal and private sector jobs in order to keep highly qualified workers from leaving government jobs.

The biggest change was the creation of Locality Adjustments which increase the Base Pay a certain percent based on where an employee works. Interestingly, the law links locality adjustment rates to comparable private sector salaries, not the more widely known Cost of Living fluctuations.

President's Pay Agent

In implementing these locality areas, the law directed the president to create a Pay Agent known as the President's Pay Agent. In Executive Order 12748 President George H. W. Bush named

  1. Secretary of Labor,
  2. the Director of the Office of Management and Budget, and
  3. the Director of the Office of Personnel Management; collectively called the President's Pay Agent.

The Pay Agent creates an annual report that identifies regions with a pay gap between federal and private sector salaries greater than 5%. The Pay Agent also makes a recommendation about what the locality rates should be. This report is published 13 months prior to the start of the calendar year for purposes of which it is prepared. The Pay Agent's responsibility is codified in Title 5 U.S.C. §§ 5304(d).

President's Alternative Pay Plan

This report is then transmitted to the president. The president then review the Pay Agent's report and may or may not publish his own Alternative Pay Plan. The Pay Agent's report along with the President's Alternative Pay Plan are then transmitted to congress by September 1 of the year before the start of the calendar year for purposes of which they are prepared.

Congress's Role in Setting General Schedule Pay

After receiving reports from the President and the President's Pay Agent, Congress can act to pass legislation increasing the General Schedule base pay and Locality Rates. If Congress passes such legislation, the new rates go into effect at the start of the new year. However, Congress will often not pass any legislation regarding federal employee salaries.

When Congress does not pass such legislation, the president is compelled to take action through executive order. Otherwise, federal employee's pay would remain the same (Note: This has happened before. As a result, federal employee salaries did not increase in 2011, 2012, or 2013).

In 2014, 2015, and 2016 — after inaction by Congress — President Obama's signed executive orders making his Alternative Pay Plan law. Each of these years, federal employees received a 1% base pay increase and varying locality increases averaging less than 1%. In 2016, the total average pay raise, including locality increases, was 1.3%.

Who Decides Other Federal Employee Policies

There are many rules regulating what federal employees can and cannot do.

The Office of Personnel Management is tasked to regulate most details such as grading standards and policy -- some of which is codified and some is set by OPM as the need arises. OPM can even create higher base rates of pay, called Specialty Pay Rates, for individual grades, steps, regions, and occupations if government's recruitemnt or retention efforts are significantly handicapped (see Title 5 U.S.C. §§ 5305).

The Office of Personnel Management may prescribe regulations necessary for the administration of this subchapter.

Excerpt from Title 5 U.S.C. §§ 5338

Click to view the 2018 General Schedule Rates. We will continue to publish the more up-to-date General Schedule Pay Rates as soon as they become available.

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