Locality Pay and How it Impacts Federal Employees

Locality pay is one wrinkle in the complex federal pay system that can make a big difference in the amount of pay received by a federal employee. Here is a quick summary of the new recommendations from the Federal Salary Council that may interest many federal employees.

The federal pay system continues to creak along in its current form despite criticism from those who think federal employees are paid too much and those that think they are not paid enough. Anyone who says the pay system is easy to understand isn’t paying much attention beyond how it may work in one organization in one locality.

When looking at the nationwide system, it is a morass. Perhaps that is why it continues to exist; it is very complex with various systems and there is little incentive to tackle the work that would be required to come up with a uniform system as any new system would have new winners and losers in the federal pay lottery.

The latest event is a new document from the Federal Salary Council regarding the latest iteration on the locality pay system. In general, concludes the Council, “the overall gap between base  GS average salaries (excluding any add-ons such as GS special rates and existing locality payments)  and non-Federal average salaries surveyed by BLS in locality pay areas was 61.29 percent. The amount needed to reduce the pay disparity to 5 percent (the target gap) averages 53.61 percent.” Part of the reason all of this is confusing is that these figures are before locality pay is taken into consideration. In other words, those in a locality pay area make more money than those federal employees who are not in one of these locality pay areas.

The Federal Salary Council consists of union representatives and outside pay experts. It reports to the President’s Pay Agent. The pay agent, which consists of the Labor Department Secretary, Director of the Office of Management and Budget and Director of Office of Personnel Management, then makes recommendations to the White House.

For example, those in the Washington, DC area have a kicker of 24.22% added into their salary for locality pay. Those in the San Francisco area receive an additional 35.15%. The differential adds up. So, for example, a GS-12 federal employee at a step five in the San Francisco area will receive $92,321. That same employee who is in the same step and grade but living in Washington, DC will receive $84,855. That employee in Huntsville, Alabama will receive $79,253 while those in the “rest of the U.S.” will get $77,983.

Not surprisingly, many employees who are not in a locality pay area would like to be included. Some of these areas did not meet the criteria used to establish pay areas. But, good news for employees in 12 areas, the Council has recommended setting up 12 new areas starting in 2014. Here are those areas that may be added “provided adequate funding for locality pay increases in 2014.”

Those with the biggest “pay gaps” are the ones most likely to be added although the recommendation is to include all of them in 2014. Here are the areas recommended as an addition to the locality pay process in 2014.

New Locality Pay Areas

Area March 2012 GS Base Payroll Pay Gap Recommended locality rate (target pay gap)
Albany $166,730,596 55.34% 47.94%
Albuquerque $510,495,966 45.88% 38.93%
Austin $366,557,509 51.17% 43.97%
Charlotte $168,635,266 47.85% 40.81%
Colorado Springs $561,339,429 52.99% 45.70%
Davenport $266,360,779 46.44% 39.47%
Harrisburg $413,576,464 52.18% 44.93%
Laredo $169,685,744 64.25% 56.43%
Las Vegas $275,731,172 60.41% 52.77%
Palm Bay $309,775,047 48.75% 41.67%
St. Louis $783,335,734 52.34% 45.09%
Tucson $491,018,021 50.52% 43.35%
Subtotal $4,483,241,727 51.67%
Rest of U.S. $34,307,554,189 40.13% 33.46%
Adjusted RUS $29,824,312,462 38.40% 31.81%

Locality Pay Recommendations 2012

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. Follow Ralph on Twitter: @RalphSmith47