The annual political debate over the amount of the 2025 federal pay raise has begun. The bidding process has opened at 7.4% in legislation introduced this week in both the House (H.R. 7127) and the Senate (S. 3688).
Congressman Gerry Connolly (D-VA) and Senator Brian Schatz (D-HI) introduced their annual Federal Adjustment of Income Rates (FAIR) Act which would give federal employees a 7.4% raise in 2025. This consists of a 4% base pay increase and 3.4% for locality pay.
Before federal employees get too excited when they see this proposed pay raise, it is important to know that the FAIR Act has become an annual tradition for Connolly and Schatz.
Connolly has introduced the bill every year since 2014. It has never become law and the final federal pay raise has always ended up being lower as it meanders through the usual political process each year, but it does serve to kick off the annual political process for setting the pay raise for federal employees.
The table below shows the proposed annual pay raises in the FAIR Act and what the federal pay raise turned out to be.
How is the Federal Pay Raise Determined?
Determining the annual federal pay raise for current federal employees is part of a political process. As noted previously, introducing the FAIR Act has become an annual event and has begun to mark the first step in the annual process.
The next likely step will be when the White House publishes its budget proposal for next year. This typically contains a proposed raise for the federal workforce.
Because the process is subject to politics, this means the process for deciding on whether there will be a federal pay raise (there have been years of no raises) and what the amount will vary from year to year. The variations depend on the political situation at any given time. This is what makes the process 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. In many years, Congress has not passed legislation on the subject.
Role of FEPCA
FEPCA is an acronym that stands for the Federal Employees Pay Comparability Act.
FEPCA established a two-part annual pay adjustment for General Schedule (GS) employees of the federal government. Under FEPCA, there is an across-the-board pay adjustment and a locality pay adjustment.
Locality pay varies by pay locality. Because of locality pay, a federal employee’s salary will vary in different areas of the country.
FEPCA also established an automatic formula to determine the annual pay raise for federal employees. Part of the reason for confusion about an annual federal employee pay raise is that every president has ignored the FEPCA formula since FEPCA was passed in 1990. It has been ignored because the cost of implementing the formula would be very expensive.
If you are a new federal employee, you may hear comments such as “If FEPCA is followed this year, we will get a 25% pay raise.” That may be a true statement but it is not relevant. Federal employees have never received a pay raise like that since the passage of FEPCA, and it will not be implemented to provide a huge pay raise next year either.
President’s Alternative Pay Plan
Instead of implementing the FEPCA formula, the president can, and often does, propose an alternative pay raise that ignores the FEPCA formula.
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 proposed 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 following year. When that happens, the president then sets the amount of the raise through an alternative pay plan, usually in late August.
Of course, if Congress does not like the amount of the raise in the alternative pay plan, it can still pass new legislation determining the final amount. This is what the FAIR Act hopes to accomplish when it is introduced each year.
As always, the annual pay raise is subject to political whims and actions!
Issuing an Executive Order on Pay
When this process 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.
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.