Current employees of the federal government typically receive an annual pay raise. The federal pay raise is generally applicable in the first pay period of the upcoming year.
There is often confusion, particularly among more recent federal employees, about this process and the different terms that are used. This article is about how the typical annual federal pay raise is determined.
Federal Employee Pay Raise is Not a COLA
A federal employee will typically read throughout the year about the COLA adjustment that will occur in the upcoming year. If you are a current federal employee and not a retired federal employee, the annual COLA (cost of living adjustment) does not apply to your salary. If you are retired, the annual COLA will apply to your retirement income in the coming year. There is a formula used to determine the amount of the upcoming COLA and it is automatically applied to the amount of a retired employee’s annuity payment.
The process of deciding on a salary increase for the coming year for the federal workforce is complex and confusing. Unlike the annual COLA determination for retired federal employees, the federal pay raise is determined by a political process.
How the Political Process Works
This means the process for deciding on whether there will be an annual federal employee raise—and the amount of the raise—will vary from year to year. The variations depend on the political situation at any given time. This is what makes the process is so complex.
In some years, Congress will pass annual federal pay rate adjustments in an appropriations bill. When this occurs, it is usually done in the Financial Services and General Government appropriations bill.
While this often happens, there is no legal requirement that a federal employee pay raise be addressed or considered by Congress. In many years, Congress has not passed legislation on the subject.
Role of FEPCA
FEPCA is an acronym that stands for the Federal Employees Pay Comparability Act.
FEPCA established a two-part annual pay adjustment for General Schedule (GS) employees of the federal government. Under FEPCA, there is an across-the-board pay adjustment and a locality pay adjustment. Locality pay varies by pay locality. Because of locality pay, a federal employee’s salary will vary in different areas of the country.
FEPCA also established an automatic formula to determine the annual pay raise for federal employees. Part of the reason for confusion about an annual federal employee pay raise is that the FEPCA formula has been ignored by every president since FEPCA was passed in 1990. The reason it has been ignored is the cost of implementing the formula would be very expensive.
If you are a new federal employee, you may hear comments such as “If FEPCA is followed this year, we will get a 25% pay raise.” That may be a true statement but it is not relevant. Federal employees have never received a pay raise like that since the passage of FEPCA and it will not be implemented to provide a huge pay raise next year either.
President’s Alternative Pay Plan
Instead of implementing the FEPCA formula, the president can, and often does, propose an alternative pay raise that ignores the FEPCA formula.
If the president determines that “because of national emergency or serious economic conditions affecting the general welfare,” a pay adjustment would be inappropriate based on FEPCA, he can propose a different figure.This frequently happens. It happens regardless of the president’s political party.
Normally, an alternative pay plan is proposed late in the year. It is typically released in August.
What has happened most often in the last several years is that Congress does not pass legislation on the amount of any federal employee pay raise for the next year. When that happens, the president then sets the amount of the raise through an alternative pay plan, usually in late August.
Of course, if Congress does not like the amount of the raise in the alternative pay plan, it can still pass new legislation determining the final amount. This is most likely to happen during an election year. With an election coming up, the thought process is likely to be that giving a raise = (hopefully) getting more votes for a candidate running for Congress.
As always, the annual pay raise is subject to political whims and actions!
Issuing an Executive Order on Pay
When this process has run its course, typically in late December, the president will issue an Executive Order setting the amount of federal employee pay, by locality, for the next year.
In practice, the Office of Personnel Management (OPM) calculates the amount of the federal salary for every pay locality, and the pay tables are published shortly after the Executive Order is issued.
© 2024 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.
FAQs
By law, Congress and the president determine how much, if any, pay raise federal employees get in a given year.
How are federal employee raises determined? ›
Each grade has 10 step rates (steps 1-10) that are each worth approximately 3 percent of the employee's salary. Within-grade step increases are based on an acceptable level of performance and longevity (waiting periods of 1 year at steps 1-3, 2 years at steps 4-6, and 3 years at steps 7-9).
What is the pay increase for Fedsmith 2025? ›
The 2025 budget proposal states: The Budget reflects an average pay increase of 2.0 percent for civilian employees. This increase builds on the average pay increases of 5.2 percent for 2024, 4.6 percent for 2023, and 2.7 percent for 2022.
How do you calculate federal locality pay increase? ›
To determine an employee's locality rate, increase the employee's "scheduled annual rate of pay" by the locality pay percentage authorized by the President for the locality pay area in which the employee's official worksite is located. Locality pay areas are defined in 5 CFR 531.603.
What is the pay increase for GS employees in 2024? ›
Federal government employees who are paid using the General Schedule pay plan, including Law Enforcement Officers, are receiving an average 5.2% pay increase for 2024, which will be effective Jan. 14, 2024. This is the largest pay raise federal employees have received since the 1980s.
How are pay raises determined? ›
Make sure you're prepared if you're going to ask your boss for a raise. Pay increases tend to vary based on inflation, location, sector, and job performance. Most employers give their employees an increase of around 3% per year. Consistent job switching may have an impact on the rate at which your salary increases.
How should raises be determined? ›
Many employers agree that salary increases should be primarily based on performance and experience. Companies require employees to show commitment to excellence and a guarantee of loyalty before offering a raise.
What is the cola for federal employees 2025? ›
President Biden's fiscal 2025 budget proposal, released Monday, would institute an average 2.0% pay raise for federal civilian employees next year, a significant decrease from each of the last two years.
What is the CSRS Cola update for 2025? ›
The latest estimates from the Senior Citizens League predict a 2.4% COLA for social security and CSRS in 2025, and this would mean a 2.0% adjustment for FERS. If the adjustment ends up equal to 2.4%, this would be slightly higher than the Federal Reserve's current target for inflation – which is 2.0%.
What is locality pay for federal employees? ›
Locality relates to the region where the employee works. This factor adjusts the base rate of pay for the cost of living in a geographic area. While each position is assigned to a specific grade, and each employee is assigned to a step within that grade, the pay rate will vary by location.
Is There a Federal Pay Raise 2024 Calculator? Several online calculators help you predict your pay rate in 2024. That said, you can easily calculate your 2024 pay by multiplying your current pay by 1.052.
How to calculate federal pay? ›
Hourly and biweekly rates of pay for most Federal civilian employees are computed as required by 5 U.S.C. 5504(b). Hourly rates of basic pay are computed by dividing an employee's annual rate of basic pay by 2,087 hours.
What locality has the highest federal pay? ›
The locality with the highest federal pay is the San Jose–San Francisco–Oakland, California, also known as San Francisco Locality Area, with a locality pay adjustment of 44.15% for 2023. The locality areas usually comprise a cluster of counties for neighboring towns and cities.
Is GS 12 a high position? ›
The GG pay rates are generally identical to published GS pay rates. The GS-1 through GS-7 range generally marks entry-level positions, while mid-level positions are in the GS-8 to GS-12 range and top-level positions (senior managers, high-level technical specialists, or physicians) are in the GS-13 to GS-15 range.
How much does a GS 5 make in 2024? ›
As of Apr 24, 2024, the average annual pay for a Gs 5 in the United States is $98,176 a year. Just in case you need a simple salary calculator, that works out to be approximately $47.20 an hour. This is the equivalent of $1,888/week or $8,181/month.
How often do GS employees get step increases? ›
As a GS employee, you have to wait one year to increase to a step 2, 3, or 4. You must wait two years before increasing to step 5, 6, or 7.
How do GS grade increases work? ›
Each grade increase equates to a 10-15% pay increase. Step is based on how long you have worked for the federal government. Steps run from 1 to 10 with step 10 receiving the highest pay. Employees start at step 1 and move to step 2 after 1 year of service.
Are GS grade increases automatic? ›
Promotions up to GS-12 and below can be given automatically or at management's discretion. Below GS-12 is considered non-competitive. At GS-13 and above, positions are considered competitive and must be listed publicly on USAJobs.gov for any qualified U.S. citizen or current federal employee to apply.
Are within grade increases automatic? ›
(a) An employee paid under a regular Federal Wage System schedule with a work performance rating of satisfactory or better shall advance automatically to the next higher step within the grade in accordance with section 5343(e)(2) of title 5, United States Code.
What is the federal employee raise for 2025? ›
President Biden's fiscal 2025 budget proposal, released Monday, would institute an average 2.0% pay raise for federal civilian employees next year, a significant decrease from each of the last two years.
