How to Get High Federal Locality Pay and Live in a Less Expensive Area

Are some federal employees receiving locality while living and working outside of that pay area? A report and questions from a Senator highlight the issue.

Locality Pay is a Significant Employee Benefit

Federal employee locality pay is a significant benefit for federal employees. Employees working in a locality pay area receive a higher salary than those in the “Rest of the U.S.” and annual raises in these locality pay areas are larger.

Here is an example:

The Rest of the US is at the bottom of the heap regarding pay increases for federal employees. The San Francisco pay area is at the top of the list for the largest dollar increase in pay (the actual name is the San Jose-San Francisco-Oakland locality pay area). These federal employees had an increase of $22,282 over seven years for a GS12, Step 5.

58 Federal Locality Pay Areas: 18.5% to 25.86% in 7 Years

With the higher pay resulting from being in particular locality pay areas, it is easy to understand why employees want to be in these areas.

With the COVID pandemic, the number of employees working remotely significantly increased. Some of these employees were no longer required to report to the office every week or every other week. At the same time, some of these employees live outside the boundaries of a locality pay area where their agency is located and which provides a higher salary scale.

Letter From Senator Joni Ernst Highlighting LPA Problems

Senator Joni Ernst (R-IA) recently sent a letter to the Director of a federal agency with these comments:

I am concerned you are undermining the mission of the Defense Health Agency (DHA) to placate the parochial interest that is DHA’s employee unions….Among the provisions of the (new Master Labor Agreement) MLA was authorization for the covered DHA employees to ‘telework for up to ten (10) days per pay period.’ As you know, there are 10 days in a pay period.

There is no requirement to verify from where the employee will be teleworking. DHA is
expected to take it on faith that the employee is being forthright and honest with the DHA about their location when they are on permanent telework, creating a situation ripe for locality pay fraud. Of note, when the Office of the Inspector General of the Architect of the Capitol analyzed its locality pay practices, it found a full 80 percent of its sampled employees received improper locality pay.

What About Locality Pay When an Employee Works at Home Outside the Pay Area?

What if an employee is engaging in telework, living in an area that is not in a locality pay area or an area with a lower locality pay?

Can an employee live in a lower cost of living area when doing telework while collecting a salary just as if the employee was working in an area with higher wages?

While the size of locality pay areas continues to expand based on recommendations routinely made by the Federal Salary Council (FSC), some employees live even further away from the central location of a locality pay area.

As noted in the letter from Senator Ernst, there is no mechanism to verify teleworking employees are abiding by any standards regarding telework.

Locality pay is based on an employee’s official worksite. The official worksite is usually the location where an employee usually performs work. If the employee’s work involves recurring travel or the employee’s work location routinely changes, according to OPM, the official worksite is where the employee’s “position of record” is based. This decision is made by the employing agency. The official worksite should be in a locality pay area where the employee regularly performs work.

A recent report about the Architect of the Capitol noted, “(AOC) policy clarified that locality pay is based on an employee’s official worksite and that employees not scheduled to report to the regular worksite should receive locality pay based on their remote work location, except for temporary telework arrangements.”

The report found that 80 percent of the 25 remote employees identified in a study had an incorrect duty station and were therefore paid an incorrect amount of locality pay.

Role of Unions in Enabling the Problem

Senator Ernst also highlights the problem by citing a new collective bargaining agreement as one that is “remarkably permissive when it comes to the requirements teleworking
employees must meet. There is no requirement to verify from where the employee will be teleworking.”

The labor agreement also undermines new managers who may step into oversight roles by affirmatively stating, “new agreements are not required when a new supervisor is assigned to an employee without a change in position.”

Perhaps the AOC situation is unique. The Inspector General investigation found problems with improperly classifying the status of 80 percent of the employees working in remote areas.

There are likely to be similar problems in agencies where an agency has not taken proactive action to determine if the agency resources are being spent correctly or if money is being spent to benefit employees who may be receiving benefits to which they may not be entitled due to lax oversight.

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