OPM Issues Guidance on Implementing $15 Minimum Wage for Federal Employees

The Office of Personnel Management has moved out on implementing a $15 minimum wage for all federal employees.

Shortly after taking office, President Biden issued an Executive Order directing OPM to “provide a report to the President with recommendations to promote a $15/hour minimum wage for Federal employees.”

OPM has taken another step towards making the $15 minimum wage a reality with a memo it issued this week for agency heads with directives on how to go about altering the federal pay scales to provide it for all federal employees.

One of the first things OPM notes in the memo is that not many federal employees currently make less than $15 per hour. The Departments of Veterans Affairs, Defense and Agriculture collectively employ most of the impacted employees. There are about 67,000 federal employees total out of a total workforce of 2.2 million federal employees.

For the federal employees that are impacted, OPM had to figure out a way to implement the minimum wage across what is a very complex situation with different pay systems for the federal workforce.

As FedSmith author Ralph Smith wrote last year:

In effect, OPM is now researching options for implementing a $15 minimum wage for all federal employees. No doubt, this is a large undertaking as implied by the statement in the OPM guidance. 

With different pay systems in place in federal government, different pay rates in different localities under the General Schedule pay system, and overlapping legislative authority for the different systems, OPM will have to deploy multiple resources to successfully implement President Biden’s desire to have a new minimum wage requirement applied to the federal workforce.

This has turned out to be exactly what OPM is facing in instituting the new minimum wage requirement.

In its memo, the agency said:

In order to implement the President’s policy, OPM is issuing a memorandum for heads of Executive departments and agencies that provides implementing guidance for adjusting pay rates for GS and FWS employees stationed in the United States (including its territories and possessions) to at least $15 per hour by authorizing new GS special rates (established by OPM) and FWS special rates (approved by OPM). OPM has established GS special rates and will approve FWS special rates based on the determination that low pay rates are resulting in or will likely result in significant difficulties in recruiting and retaining qualified employees in these positions.

In other words, OPM has had to create special pay rates to comply with the Executive Order.

Agencies must institute the new pay rates (and thus the $15 per hour minimum wage) by January 30, 2022, or make it retroactive to that date if they cannot get it put in place by then.

New Special Pay Rates for the General Schedule

So how is OPM solving this complex problem? It is using the authority granted to the agency under law that allows it to “establish special salary rates for a group or category of GS positions in one or more geographic areas to address existing or likely significant challenges in recruiting or retaining well-qualified employees.”

In this case, OPM says it “has reasonably determined that, for Federal employees stationed in the United States (including its territories and possessions), GS rates of basic pay less than $15 per hour are creating or are likely to create significant recruitment and/or retention problems, supporting the creation of a special pay rate schedule for GS employees stationed in the United States (including its territories and possessions).”

So, to address these “potential staffing issues,” OPM has created “a single nationwide special pay rate schedule of annual rates” for GS grades 1-4 which will now apply to all federal employees in the GS pay system in the United States who fall under the $15 per hour minimum wage threshold.

Here is what that new special paytable looks like:

Nationwide Special Rate Schedule to Achieve a Minimum Pay Rate of $15 Per Hour

Special Wage Rate Schedules for Federal Wage System (FWS) Federal Employees

OPM is solving the problem for federal employees under the FWS in the same manner. It has determined that “FWS rates of basic pay less than $15 per hour are creating or are likely to create significant recruitment and/or retention problems, supporting the creation of a special wage rate schedules for FWS employees stationed in the United States (including its territories and possessions).”

Consequently, the Department of Defense will establish “a $15 per hour minimum pay rate for appropriated fund and nonappropriated fund FWS wage schedules for employees stationed in the United States (including its territories and possessions) where any pay rate would otherwise be below $15 per hour on January 30, 2022.” OPM will then approve the new pay rates.

OPM said that this new $15 per hour minimum pay rate will be set up as follows:

• The second rate of grade 1 on a wage schedule will be set at a level which, upon application of the standard 4 percent step rate interval, provides a first rate for the grade which is equal to at least $15 per hour.
• OPM has determined that it will approve special rates based on lead agency requests for FWS employees where necessary to establish a $15 per hour wage rate. An appropriate intergrade differential will be applied until a grade is reached at which the new payline rate is equaled or exceeded by the corresponding payline rate determined through normal prevailing rate determination processes; rates for all grades above that point will be based on the normal prevailing rate determination processes.