Federal Employee Pay and the Federal Salary Council

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By on November 14, 2018 in Pay & Benefits with 0 Comments

Map of the United States with push pins in it and a $100 bill held in place on the map with a push pin depicting locality pay

The Federal Salary Council (FSC) held a recent meeting and, as implied by the name of the organization, the FSC has recommended changes in the federal salary structure by adding new groups of federal employees into the locality pay system.

Earlier this year, the FSC recommended:

  • The Pay Agent should start the regulatory process to establish Burlington, VT; Virginia Beach, VA; Birmingham, AL; and San Antonio, TX as new locality pay areas. The Council has previously recommended that the President’s Pay Agent establish these cities as new locality pay areas.
  • The Pay Agent should begin the regulatory process to establish McKinley County, NM, as an area of application to the Albuquerque locality pay area and to establish San Luis Obispo County, CA, as an area of application to the Los Angeles locality pay area.
  • The Pay Agent should establish Corpus Christi, TX; and Omaha, NE as new locality pay areas for 2019. The Salary Council concluded its estimated pay disparities for these areas exceeded those for the “Rest of U.S.” locality pay area by more than 10%, on average, from 2015-2017.

In its recent meeting, FSC has now added Des Moines, Iowa to the list of areas qualifying for an addition to the list of locality pay areas.

The President’s Pay Agent is made up with Office of Management and Budget Director Mick Mulvaney, acting Office of Personnel Management Director Margaret Weichert and Labor Secretary Alex Acosta. This organization can accept or reject FSC recommendations and issue instructions to the Office of Personnel Management (OPM) for implementation.

Adding New Locality Pay Areas

In 2015, the President’s Pay Agent’s report stated:

We tentatively agree that, after appropriate rule-making, separate locality pay areas should be established for Burlington, VT, and Virginia Beach, VA. BLS should deliver data separately for the Burlington-South Burlington, VT, MSA and for the Virginia Beach-Norfolk, VA-NC, CSA, and exclude those areas from the “Rest of U.S.” computations for 2016 data deliveries to OPM staff.

Employees in Burlington and Virginia Beach may have noticed that they are still not in a locality pay area as of 2018.

Earlier this year, OPM issued a proposal in the Federal Register to add the following locality pay areas. These pay areas would impact about 62,000 federal employees. These proposed new locality pay areas were:

  • Birmingham-Hoover-Talladega, AL;
  • Burlington-South Burlington, VT;
  • San Antonio-New Braunfels-Pearsall, TX; and
  • Virginia Beach-Norfolk, VA-NC.

Final regulations have not been issued by OPM. There is a chance, probably a good chance, these new areas will be added for 2019. According to OPM, the “[locality] pay rates for the four new locality pay areas would be set by the President at a later date after they would be established by regulation.”

Typically, the Pay Agent issues a report in December regarding its decisions on locality pay in the coming year. That is significant because, while the FSC makes recommendations, the Pay Agent actually makes the decisions to implement the recommendations (or not to implement them). Based on how this system has worked in the past, there is a likelihood the next Pay Agent decision will be issued in the next several weeks.

OPM’s final regulations on the pay areas could also be issued at about the same time as the new Pay Agent report.

When a new locality pay area is added to the growing list, or another geographic area is added to an existing locality pay area, federal employees working in those areas leave the “rest of the U.S.” designation. This results in at least a small pay raise. It also adds more to any yearly salary increase when a new annual pay raise is approved.

It is possible the Pay Agent will direct the Office of Personnel Management (OPM) to initiate the regulatory process to establish McKinley County, NM as part of the Albuquerque locality pay area and to establishing San Luis Obispo County, CA, as part of the Los Angeles locality pay area.

Federal/Private Sector Pay Disparity

In its most recent meeting, the FSC again concluded there is a significant average salary difference between federal and private sector employees. In its most recent report, it has now stated the disparity is down to 30.91 percent. That is less than the 31.86 percent disparity it reported back in April.

The Salary Council’s recommendation of implementing locality pay raises of more than 30% is unrealistic. Perhaps the strategy is to propose a large pay raise while hoping there will at least be a smaller raise forthcoming.

About that 2019 Federal Pay Raise

Starting in January, it is possible (although not definite) that federal workers will receive an average pay raise of 1.9 percent. If that occurs, this will be divided up as 1.4 percent raise for all federal employees under the General Schedule pay system and an average of 0.5 percent for locality pay. Federal employees in areas such as the Washington, DC metropolitan area would receive an amount higher than 1.9%. Employees in less expensive areas would receive less than the 1.9% average.

We will not know if there will be a pay raise until early in December. The decision will probably be made through an appropriations bill still awaiting a decision in Congress.

© 2018 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. Follow Ralph on Twitter: @RalphSmith47

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