What Are “Special Rates” for Federal Employees? Will They Receive 4.1% Pay Raise?

Data Call for Special Rates

Each year, the Office of Personnel Management (OPM) sends out a notice to agencies for a special rates data call.

This is because OPM authorizes higher rates of pay for specific occupations, grades, and locations to alleviate existing or likely significant recruitment or retention difficulties. The purpose for the data call is to see if the rates should be terminated, reduced, or increased based on recent staffing considerations.

What About 2023 Pay Raise for Special Rates Employees?

Historically, the default January pay raise adjustment for special rates employees is the same as the January across-the-board adjustment for General Schedule base pay rates. On October 19, 2022, OPM Director Kiran A. Ahuja wrote:

I have determined that the default January 2023 adjustment for special rates will be 4.1 percent, which is equal to the January 2023 across-the-board adjustment for GS base rates required under 5 U.S.C. 5303(a) and consistent with the increase for GS base rates in President Biden’s alternative plan for January 2023 pay adjustments.

That percentage for special rate employees matches President Biden’s alternative pay plan for federal employees for 2023. Under the alternative pay plan, federal employees will receive a 4.1% base pay increase and an average locality pay raise of 0.5%. The overall increase announced was 4.6% for 2023. The pay raise and the locality pay rates will not be known until the president issues an Executive Order announcing the pay raise sometime in late December.

Special Pay Rates are Complex. This is Why

The federal government’s pay system is complex. With 53 existing locality pay areas, the General Schedule pay system is already complex. The special pay rates system is even more complex.

An agency can submit a special rate request at any time throughout the year for changes to take place after January 2023. If an agency wanted to make a request to take effect next month, the request had to be submitted by November 18, 2022.

An agency requesting a special rate adjustment different from the default January 2023 adjustment for special rates has to follow a set of guidelines:

• Use OPM’s list of special rate tables by agency to see which table(s) apply in the agency;
• Review each special rate schedule applicable in the agency for possible termination, reduction, or increase other than the percentage increase by which the base General Schedule will be adjusted in January 2023 (4.1%); and
• Agencies are to consider the circumstances and factors consistent with OPM’s regulations at 5 CFR 530.304 and 530.306. (This usually means when the agency must address existing or likely significant recruitment or retention difficulties.)

Relationship Between Special Rates and Locality Pay Rates

The General Schedule locality pay system provides higher salaries to federal employees in 53 different locality pay areas. What happens if a special rate employee is in a locality pay area?

In that case, the special rate is not applicable if an employee is stationed in a location where a higher locality rate applies. OPM puts a footnote below the special rate schedule that explains:

• A higher locality rate may apply at certain grades or steps in certain locations or
• The special rates for a specific grade apply only to certain locations where the locality rate is lower.

As noted earlier, the special rate program is even more complicated than the GS locality pay system. Here is one other occasional complexity.

For some special rate schedules, special rates only apply at specific steps of a grade as any applicable locality rate exceeds the special rate at other steps. This occurs in the case of special rate schedules when the special rate supplement is a fixed dollar amount instead of a percentage.

Because a locality payment is a fixed percentage, a special rate computed using a fixed-dollar supplement may be higher than the locality rate at lower steps but lower than the locality rate at higher steps. When no special rate appears at a particular step in a schedule, the locality rate for that step in all covered locations is higher than the special rate.

Special Rates, Traditional Government Pay System, and Competing For Specialized Jobs with Private Sector

The General Schedule pay system was established in 1979. It was intended to provide a standard framework for establishing the pay hierarchy for federal employees in white-collar occupations. The central core of the GS classification system is codified in law.

In January 1994, the Federal Employees Pay Comparability Act of 1990 (FEPCA) introduced a “locality pay adjustment” component to the General Schedule. There are now 53 locality pay areas. That number continues to go higher and more federal employees are routinely added into the locality pay system. It provides higher salaries for federal employees than the basic pay table. Some of the locality pay areas are large and cover multi-state areas.

It is hard to make changes in an organization the size of the US Federal Government. But, while it is slow, it has continued to evolve and changes are made when it is necessary to to continue functioning.

Federal Pay Systems Evolving

One area in which major changes have happened is computer technology. Uncle Sam has not evolved as fast as many companies have in creating effective computer systems. It has made significant changes though and the special rates program is part of this change.

Congress gave the Department of Homeland Security the authority in 2014 to design its own system exempt from many of the government’s traditional competitive hiring, classification, and compensation practices in creating effective cybersecurity positions. It took seven years, but the cybersecurity system is in effect. The agency describes this system as having competitive salaries, streamlined hiring, and more career development opportunities. Pay and benefits are generally higher than in other federal jobs with a starting salary for executive level positions of up to $210,000.

Federal government pay systems are much different than they were in 1949 and much more complex—particularly for jobs with skills that are in high demand.