2020 has been an unusual year, so it is not a surprise that the road to arriving at the 2021 pay raise for federal employees also took some unusual twists and turns.
The bottom line, however, is that federal employees will receive a 1% across the board pay raise in 2021. There is no extra amount allocated for locality pay. The amount that has been finalized was consistent with President Trump’s alternative pay raise proposal when it was issued in February 2020.
President Trump has issued the executive order finalizing the 2021 pay raise.
There is often an extra amount added in for locality pay areas. In 2020, for example, there was a 2.6% across the board raise for federal employees with an additional .5% for locality pay.
What began in February as a 1% raise, then at the last minute saw the threat of a pay freeze, ultimately ended in the 1% pay raise. Despite the passage of the appropriations and COVID-19 relief bill, it was not certain federal employees would have a 1% raise in 2021 with the greater than usual political wrangling.
In addition to the 1% pay raise, there will be changes to locality pay areas detailed in a recent FedSmith article. The Office of Personnel Management (OPM) locality pay area descriptions for 2021 include a description of the Des Moines, Iowa area as a new locality pay area. This was approved to become a new locality pay area two years ago. This is the first year the Des Moines area appears as a new locality pay area due to the regulatory process that is required to implement the change.
A second change is that the Los Angeles pay area now includes Imperial County, California for the first time.
You can see the impact of the pay raise on your salary and see the latest locality pay areas for 2021 using this General Schedule pay calculator.
What About Federal Retirees?
Whenever the annual pay raise of cost of living adjustment (COLA) comes up, we always get questions from either current federal employees or retirees asking, “What about my pay raise?” (current federal employees) or “What does this mean for my COLA?” (federal retirees).
The answer, in this case, is simple: the annual pay raise only applies to current federal employees. The process for determining the annual pay raise and the annual COLA for Social Security recipients and federal retirees are two completely different processes.
In 2021, federal retirees can expect a COLA of 1.3%. This is determined by an automatic formula and was announced in October. The federal pay raise, however, is determined by a political process by Congress and the president. For more on the differences, see How is the Annual COLA Different from an Annual Pay Raise?.