Locality Pay and the Federal Pay Schedule

A number of readers have recently inquired about locality pay areas for January 2015 and whether previously announced locality pay areas will be added to the existing pay system. Their rationale for asking is understandable; they are hoping for a substantial pay increase in their geographic areas regardless of any overall pay raise that is implemented for the general schedule pay rates.

A new document has surfaced which does not provide a definitive answer to their question but does provide hope for the future personal finances of federal employees in the 12 new areas that have been proposed for future locality pay differential payments. For federal employees who were hoping to be added to existing locality pay areas, the news is not positive. For federal employees in some areas adjacent to locality pay areas, the proposal to expand the locality pay areas has not been approved. Instead, the most recent report (explained in more detail below) notes “there is no reason to increase the commuting interchange threshold for adjacent single counties.”

The federal pay system is convoluted with many exceptions and variations. For white collar employees, the general schedule (GS) system is the basic pay schedule which applies to these positions. But an increasing number of federal employees receive pay that is higher, sometimes much higher, than the commonly published rate for GS grades. In fact, federal employees in major metropolitan areas now receive a locality pay differential.

These higher payments are approved (or disapproved) by the President’s Pay Agent. The pay agent has three members, Secretary of Labor Thomas E. Perez; Deputy Director for Management, Office of Management and Budget, Beth Cobert; and Director of the Office of Personnel Management, Katherine Archuleta. The pay agent reviews recommendations of the Federal Salary Council.

While unions do not generally negotiate wages for federal employees, they can influence pay for many federal employees through a back door into the federal pay system. Here is how this is done.

The primary membership of the Federal Salary Council consists of federal employee unions. Five of the seven members are unions. The Chairman is president of the American Society for Public Administration and the other member is from Brigham Young University. This council makes recommendations on locality pay to the president’s pay agent. As noted in an article by Howard Risher, “The recommendations submitted by the Pay Agent to the President have been rejected annually for two decades.  It’s clear the reported conclusions are not credible. I doubt if even the union members of the Federal Salary Council believe employees on average are paid 34.6% below market rates.”

In any event, that is how the locality pay system is constructed. The Salary Council has recommended adding a number of new locality pay areas to encompass a large number of federal employees into the locality pay system. In addition, the Salary Council recommended adding a number of new areas to existing locality pay areas.

Of course, as more areas are added to locality pay areas, the smaller the “rest of the U.S.” becomes in terms the number of federal employees still under the basic GS salary system. The recommendation for adding 12 new locality pay areas was rejected by the President’s Pay Agent for inclusion in 2014. The same recommendation has again been made by the Salary Council for including these new pay areas into the locality pay system for 2015 and also adding a number of new areas to existing locality pay areas as well.

In a document dated June 2014, the President’s Pay Agent issued a new report on federal pay. This report states:

“We remain in agreement with the Council that we should establish 12 new locality pay areas, which the Pay Agent tentatively approved in its May 2013 report. However, we have not yet made a final decision on what the timing should be for this significant change. We also agree with the Council that it may be appropriate, after appropriate rule-making, to use the Office of Management and Budget’s February 2013 metropolitan area definitions as the basis for locality pay areas.

So, in effect, the Pay Agent has not decided whether to include the new locality pay areas or what the metropolitan area definitions will be. As noted in the recent report: “The Pay Agent still plans, after appropriate notice and opportunity for comment, to establish by regulation the 12 new locality pay areas….” But, for those who may want to cheer after reading this portion of the report, the Council elsewhere noted in its report: “Although we agree with the Council that we should issue regulations proposing establishment of the 12 new locality pay areas the Pay Agent tentatively approved in its May 2013 report, we have not yet made a final decision on what the timing should be for this significant change.”

The new locality pay areas that have been recommended are:

  • Albany-Schenectady-Amsterdam, NY Combined Statistical Area;
  • Albuquerque, NM Metropolitan Statistical Area;
  • Austin-Round Rock-Marble Falls, TX Combined Statistical Area;
  • Charlotte-Gastonia-Salisbury, NC-SC Combined Statistical Area;
  • Colorado Springs, CO Metropolitan Statistical Area;
  • Davenport-Moline-Rock Island, IA-IL Metropolitan Statistical Area;
  • Harrisburg-Carlisle-Lebanon, PA Combined Statistical Area;
  • Laredo, TX Metropolitan Statistical Area;
  • Las Vegas-Paradise-Pahrump, NV Combined Statistical Area;
  • Palm Bay-Melbourne-Titusville, FL Metropolitan Statistical Area;
  • St. Louis-St. Charles-Farmington, MO-IL Combined Statistical Area; and
  • Tucson, AZ Metropolitan Statistical Area

When a final decision is made on adding new locality pay areas, we will provide the new information as it becomes available.

President’s Pay Agent Report–June 2014

© 2016 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

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About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources.

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