2016 Locality Pay and How It Will Impact Your Paycheck

FedSmith has received questions from geographic readers in areas to be covered by new locality pay rates. Most readers asking questions are wondering if they will receive the full locality pay differential cited by the Federal Salary Council. Our advice: Don’t make any purchases based on your expectations of increased income until you know the actual amount you will receive. This article explains why.

As employees who will be impacted certainly know by now, there will be more locality pay areas that will raise the salaries of employees in those new locality pay areas. (See Who Would Be Impacted by New and Expanded Locality Pay Areas?)

Approximately 102,000 federal employees could be impacted by these new locality pay areas.

The 13 new locality pay areas and the target pay rate cited by the Federal Salary Council are:

Locality Area Locality Rate (Target Pay Gap)
Albany- Schenectady, NY 46.02%
Albuquerque-Santa Fe-Las Vegas, NM  34.51%
Austin-Round Rock, TX  47.47%
Charlotte-Concord, NC–SC  41%
Colorado Springs, CO  48.20%
Davenport- Moline, IA–IL  40.14%
Harrisburg-York- Lebanon, PA  43.76%
Laredo, TX  54.74%
Kansas City- Overland Park-Kansas City, MO–KS  11.88%
Las Vegas-Henderson, NV–AZ  51.39%
Palm Bay- Melbourne-Titusville, FL  38.89%
St. Louis-St. Charles-Farmington, MO–IL  45.23%
Tucson-Nogales, AZ  47.47%

(The 11.88% gap for Kansas City was cited by the Federal Salary Council as the “Area Pay Gap Compared to “Rest of U.S.” Research Areas” and not as the “Locality rate” as was done with the other new locality pay areas which were recommended earlier by the Council.)

How Will My Salary Be Affected?

The obvious question that most people will want answered is “how much of an increase will I receive in 2016 in my new locality pay area?”

We do not know the answer to that question yet. But, before anticipating a pay raise of 45% or so starting in January, and going ahead to move into a new house or buying a new car this year because of this large pay raise, it would be wise to wait and see how much additional income you will actually receive as the percentage increase may prove deceiving.

The actual percentage for each new locality pay area has not been announced. The percentages listed above have been cited by the Federal Salary Council as the target pay gap for 2016. This figure does not translate into the amount of the increase you will receive if you are working in one of these new locality pay areas.

For comparison purposes, here are several existing locality pay areas, the target pay gap indicated by the Federal Salary Council (FSC) and the actual locality pay rate for those areas. You can see the locality pay differential for all locality pay areas at FedsDataCenter.com.

Area Locality Rate (cited by FSC) Actual Locality Rate
Boston 62.13% 24.80%
Denver 61.43% 22.52%
Houston 66.38% 28.71%
Huntsville 49.49% 16.02%
San Francisco 92.40% 35.15%
Washington 77.58% 24.22%

The existing locality rates for current locality pay areas provide a guide as to what actual pay rates will be for the new locality pay areas. As you can see in this table, existing locality areas have a lower locality rate than the figure cited by the FSC. The actual locality pay rates for the new areas are apt to have a similar differential.

Locality pay rates for these new locality pay areas will be set by the president after the new locality pay areas are established by regulation. A regulation has been proposed to establish these new areas but they have not yet been finalized.

There may also be a potential negative impact on federal employees in existing locality pay areas. As noted in the proposed regulation from the Office of Personnel Management, “Implementing higher locality pay rates in the 13 new locality pay areas could … result in relatively lower pay increases for employees in existing locality pay areas than they would otherwise receive.” (emphasis added)

In other words, do not spend the money that you anticipate you may see in January 2016. The actual amount for the new locality areas has not been announced but very likely to be lower than the 40%+ that some readers in the new locality pay areas may be anticipating.

Once the new locality pay rates are announced, FedSmith will provide the information and updated salary data at FedsDataCenter.com reflecting the new rates.

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