Will federal employees receive a pay raise in 2023? It certainly looks that way in light of the White House’s budget request for 2023 that was released today. Here is the latest update on the status of the 2023 federal pay raise.
In 2022, current federal employees received an average increase, including locality pay, of 2.7%. As usual, there are areas that received a higher pay raise. The Seattle-Tacoma area received the highest raise for 2022 with an increase of 3.21%. With a pay raise in 2022 of 3.02%, Washington, DC, and New York City locality pay areas were tied for 7th place in the 2022 list of locality play winners.
Due to inflation, the 2022 annual COLA for those under Social Security, and those receiving a federal annuity was 5.9%—the largest COLA in 40 years. (For those receiving a FERS annuity, the increase was 4.9%.) So far this year, the latest COLA estimates and predictions have been pointing to an even higher potential COLA in 2023.
Budget Proposal of 4.6% 2023 Federal Pay Raise
The proposed 2023 budget only states, “Provide a pay increase of 4.6 percent for both civilian and military employees.” The budget proposal does not distinguish between locality pay and an overall pay increase.
It is likely the 4.6% pay raise, if that is the final amount of a federal raise in 2023, would be the overall average with employees in some areas receiving more or less because of locality pay.
What About Inflation and the COLA? Will the 2023 COLA Impact the 2023 Federal Pay Raise?
In 2022, the COLA was larger than the annual pay raise. There is no direct link between the annual COLA for federal retirees and a federal pay raise for current federal employees.
Most federal employees will read throughout the year about the COLA adjustment that will be applied in January of the upcoming year. If you are a current federal employee and not a retired federal employee, the annual COLA (cost of living adjustment) does not apply to your salary.
If you are retired, the annual COLA will apply to your retirement income in the coming year. There is a formula used to determine the amount of the upcoming COLA and it is automatically applied to the amount of a retired employee’s annuity payment.
The process of deciding on a salary increase for the coming year for the federal workforce is complex and confusing. Unlike the annual COLA determination for retired federal employees, the federal pay raise is determined by a political process.
Is the Budget Proposal the Last Word on the Federal Pay Raise?
The proposed pay raise in the president’s budget is an initial step in what will likely be a long process. So, the 4.6% proposal is not a “done deal” by any means. Inflation may play a role in the 2023 pay raise for federal employees but not in the way the annual COLA is determined.
If inflation continues to rise, a large unknown factor as this is being written, the rate of inflation could impact what happens this year. If inflation continues to grow and is showing up as much as 8% or higher, Congress could decide the 4.6% proposed raise is not sufficient and pass legislation granting a higher amount.
There are several things that could change the proposal in the White House budget. The most likely steps are:
- Congress passes legislation with a new pay raise amount;
- The president issues an alternative pay plan with a different amount.
The process for deciding the annual pay raise is a political decision rather than one determined by a preset formula as is the case for the annual COLA.
The decision on whether there will be an annual federal employee raise—and the amount of the raise—may vary from year to year. The variations depend on the political situation at any given time. This is what makes the process is so complex.
In some years, Congress will pass annual federal pay rate adjustments in an appropriations bill. When this occurs, it is usually done in the Financial Services and General Government appropriations bill.
While this often happens, there is no legal requirement that a federal employee pay raise be addressed or considered by Congress. There are many years in which Congress does not pass legislation on the subject.
President’s Alternative Pay Plan
A president can, and usually does, propose an alternative pay raise.
If the president determines that “because of national emergency or serious economic conditions affecting the general welfare,” a pay adjustment would be inappropriate based on FEPCA, he can propose a different figure. This frequently happens. It happens regardless of the president’s political party.
Normally, an alternative pay plan is issued late in the year. It is typically released in August.
What has happened most often in the last several years is that Congress does not pass legislation on the amount of any federal employee pay raise for the next year. When that happens, the president then sets the amount of the raise through an alternative pay plan, usually in late August. This often matches the initial amount proposed in the White House budget proposal but that is not a requirement.
Of course, if Congress does not like the amount of the federal pay raise in the alternative pay plan, it can still pass new legislation determining the final amount. This is most likely to happen during an election year. With an election coming up in November 2022, the thought process is likely to be that giving a raise = (hopefully) getting more votes for a candidate running for Congress.
Issuing an Executive Order on Pay
When the process for determining the next federal pay raise has run its course, typically in late December, the president will issue an Executive Order setting the amount of federal employee pay, by locality, for the next year.
In practice, the Office of Personnel Management (OPM) calculates the amount of the federal salary for every pay locality, and the pay tables are published shortly after the Executive Order is issued.
How to Locate Individual Federal Employees’ Salaries
This article explains how to locate an individual federal employee’s salary.