Locality pay is a significant issue for many federal employees. It is a complex, confusing system. It may be about to get more complex and confusing than it is now.
An event such as the COVID-19 pandemic may have long-lasting consequences, and, according to the Office of Personnel Management (OPM), the federal workforce will not be an exception.
One of the changes likely to occur will be how the locality pay system is applied to federal employees in an era where more federal employees are working outside of where their official offices are located.
Where Are You Really Working?
There are now 54 locality pay areas. This means federal employees in these areas (which is most federal employees) receive higher pay than they would under the General Schedule (GS) pay schedule.
Are you in a locality pay area? That question sounds like it would be easy to answer. As with many federal human resources programs, the issue is complicated and more difficult to answer than it appears at a first glance.
Locality pay is based on an employee’s official worksite. The official worksite is usually the location where an employee usually performs work. If the employee’s work involves recurring travel or the employee’s work location routinely changes, according to OPM, the official worksite is the location where the work activities of the employee’s “position of record” are based. This decision is made by the employing agency. The official worksite has to be in a locality pay area in which the employee regularly performs work.
Telework or Remote Work Location?
OPM already makes a distinction between telework and remote work. Telework is a situation in which an employee may work away from the office but still is in the office location a number of times in a pay period.
Remote work, on the other hand, is where an employee works in a different geographic location and does not come into the office regularly to perform work, attend staff meetings, etc.
The difference can be substantial in the pay received by a federal employee.
For example, an employee who is assigned to an office in Washington, DC and is a GS- 13/Step 7 has an annual salary of $124,428. The pay for federal employees in Washington is higher than in most other parts of the country because of how the pay system is applied.
What if this employee who is technically assigned to an office in Washington, DC is working in a remote location outside of the Washington area as defined for locality pay purposes? The employee could be living in West Virginia, Pennsylvania or Southwest Virginia and working remotely in that location but being paid by Uncle Sam at a Washington pay rate.
The base pay for a GS13/Step 7 is $95,362. The pay rate of $124,428 is due to the locality pay rate in Washington. This is a differential of $29,066. If the employee is working in an area designated as the “Rest of the U.S.”, the annual pay for this grade and step is $110,572—a differential of $13,856.
Can a federal employee live and work in a rural area while technically assigned to an office in Washington? In effect, can an employee create a situation where he will receive higher pay than would normally be paid for an employee working in the rural area where his home is located and where he is working?
Here is the issue in a nutshell:
There is a concern that fully remote feds could “be able to chase higher locality pay and give themselves raises just by deciding to move to new places,” said Jason Briefel, the director of government and public affairs at Shaw Bransford and Roth, a federal employment law firm. “What does that mean for locality pay?”
OPM digs into the post-pandemic puzzle of remote work and locality pay
What is Locality Pay?
Locality pay is a localized pay rate for the federal workforce.
Each locality pay is determined by the cost of labor as measured by the Bureau of Labor Statistics (BLS). BLS conducts locality pay surveys in a number of geographic areas, with survey data representing non-federal salaries (including state and local) at distinct levels of work.
In the locality pay program, federal pay is compared to non-Federal pay for the same levels of work as measured by BLS. The cost of labor is not the same as the cost of living, although BLS measures both of these.
In effect, readers who comment that the cost of living in their area is higher than it is in areas with a higher locality pay may be correct but it is not directly relevant. The cost of labor may be higher in the other area regardless of the cost of living.
How is Locality Pay Established?
The Federal Salary Council reviews locality pay areas and makes recommendations on locality pay for the coming year—including whether to add a new locality pay area or modify existing pay areas.
The President’s Pay Agent may (or may not) accept the Salary Council recommendations. The Pay Agent issues an annual report with its conclusions and the Office of Personnel Management implements the decision of the Pay Agent.
Certain location-based pay entitlements (such as locality payments, special rate supplements, and nonforeign area cost-of-living allowances) are based on the location of the employee’s official worksite associated with the employee’s position of record.
The official worksite generally is the location where the employee regularly performs his or her duties. If the employee’s work involves recurring travel or the employee’s work location varies on a recurring basis, the official worksite is the location where the work activities of the employee’s position of record are based, as determined by the employing agency, subject to the requirement that the official worksite must be in a locality pay area in which the employee regularly performs work.
What Will OPM Do About Locality Pay?
As often happens, events overtake government policy which then is changed to reflect new circumstances. That is now occurring with the federal government’s locality pay program which was conceived and implemented long before telework and remove work locations were common in government. COVID has changed how work is performed in business and in government. Some changes in locality pay are likely to reflect this change.
