The President’s fiscal year 2021 budget proposal which was released today contains a proposal for a 1% pay raise for federal employees for next year.
In addition to the raise, the budget proposal says it would also be “…increasing funds available for on-the-spot and ratings-based performance awards.”
Regarding pay, it added:
The Administration has attempted to make pay more flexible and performance-based, since across-the-board pay increases have long-term fixed costs and fail to address existing pay disparities or to target mission-critical recruitment and retention goals. A more targeted approach that rewards the top performers with the most critical skills is needed. The Administration believes in aligning pay with an employee’s performance where possible. The existing Federal salary structure rewards longevity over performance. This is most evident in the tenure-based “step-increase” promotions that most Federal employees receive on a fixed, periodic schedule without regard to whether they are performing at an exceptional or merely passable level (granted 99.7 percent of the time). The Budget proposes to slow the frequency of these step increases, while increasing performance-based pay for workers in mission-critical areas.
Last year’s budget blueprint proposed a pay freeze for federal workers, but ultimately they received a 2.6% across the board raise. A key lesson from last year is that nothing is set in stone as the annual pay raise process plays out in Washington during the year.
In contrast with the president’s proposed pay raise, bills were recently introduced in the House and Senate to give federal employees a 3.5% pay raise in 2021. They were introduced by Congressman Gerry Connolly (D-VA) and Senator Brian Schatz (D-HI) in what has become somewhat of an annual tradition for the lawmakers. To date, their proposed raises have never come to fruition, but it also serves to put another figure into the negotiation process in Washington for the annual pay raise.
What About Federal Retirees?
One question we always get when the annual pay raise is brought up is from retired federal employees who ask a variation of this question: “Does this raise apply to federal retirees?”
The answer is no.
The annual cost of living adjustment (COLA) that federal retirees get in their annuity payments is determined by a separate, automatic process each year. In 2020, the COLA for federal retirees turned out to be 1.6%.
For additional details about the differences between a COLA and a pay raise, see How is the Annual COLA Different from an Annual Pay Raise?.