Pay Cap, Pay Compression, and Potential for Change

The pay cap impacts a growing number of federal employees every year. A new bill would eliminate it.

Every year, there are numerous articles on the upcoming federal employee pay raise and the increase in the amount for each locality pay area. Every federal employee has an economic interest in how much his or her salary will be in the new year.

Impact of Federal Pay Cap

Despite the usual enthusiasm or interest in an annual pay raise, the pay raise news has not been good for some federal employees for several years.

In 2023, the federal pay cap remained in effect. The result is that some federal managers do not receive a full pay raise. The restriction on pay increases impacts these employees:

  1. An employee serving in an Executive Schedule (EX) position or in a position for which
    the rate of pay is fixed by statute at an EX rate, and who holds a position under a political appointment;
  2. A chief of mission or ambassador at large;
  3. A non-career appointee in the Senior Executive Service (SES) paid at or above the official rate for EX-IV ($183,500 in 2023);
  4. A limited term appointee or limited emergency appointee in the SES serving under a political appointment and paid at or above the official rate for EX-IV; and
  5. Any other type of employee paid at or above the official rate for EX-IV who serves under a political appointment.

For General Schedule (GS) employees, the federal pay cap for basic and locality pay combined is set at the Executive Schedule Level IV pay rate. In 2022, this pay cap was $176,300. In 2023, this pay cap is $183,500.

The result is “pay compression,” with the salaries of a growing number of senior managers subject to the cap and managers with different levels of seniority and responsibility all making roughly the same salary.

Bill Introduced to Remove Pay Cap

Last year, DC Congressional Representative Eleanor Holmes Norton issued a press release that read:

Congresswoman Eleanor Holmes Norton (D-DC) today announced she will introduce a bill to reduce federal employee pay compression. This bill would allow federal employees who reach the pay cap in their respective pay system to receive the base and locality pay adjustments they would otherwise be entitled to. Currently, federal employees who reach the pay cap do not receive such adjustments. Norton is a senior member of the Committee on Oversight and Reform, which has jurisdiction over federal employees.

Norton to Introduce Bill to Reduce Federal Employee Pay Compression | Congresswoman Eleanor Holmes Norton (

Nothing happened after the press release was issued. A similar press release was issued on August 8, 2023, with the same wording and intent. Unlike last year, however, the bill has now been introduced (H.R. 5171).

The bill has four Democrats as co-sponsors. In the press release, Congresswoman Norton states: “This bill will allow many of the longest-serving federal public servants, District of Columbia residents among them, to receive the pay adjustments they are entitled to but for the pay cap. This bill will help the federal government hire and retain the most qualified individuals for the job.”

Ripple Effect of the Pay Cap

The pay cap has an impact on more employees than might be expected. For example, in Seattle, which had a pay raise of 5.15% in 2023, federal Senior Executive Service (SES) employees will not get a 5.15% raise.

GS 15 employees at steps 8-10 are also subject to a pay cap of $183,500. This amounts to a pay raise of about 4% for these employees rather than the 5.15% others in the Seattle locality pay area will receive.

The pay cap impacts federal employees in 31 locality pay areas. In Washington, DC, the 2023 pay raise is 4.86%. For GS 15 managers in steps 7-10, their pay is subject to a maximum of $183,500.

Federal employees in the San Jose-San Francisco locality pay area received a pay raise of 5.13% in January. But, due to the pay cap, GS 15 employees in steps 4-10 are subject to the maximum of $183,500. Moreover, GS 14 employees are also capped at Step 10.

The Norton bill would also impact these federal employees already feeling the effects of the expanding number of people impacted by the pay cap.

Will This Bill Pass?

No one knows what events could lead to a bill becoming law. With concerns about a government shutdown, the growing federal budget deficit, and the strong political divisions in our country, the chances of this bill getting passed are not good.

GovTrack estimates that the bill’s passing chances are about 1%. According to their analysis, the bill has a 4% chance of getting through a House committee and a 1% chance of being enacted. From 2021-2013, 11% of bills made it past committee and only about 2% were enacted in 2021–2023.

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47