The federal government’s general schedule (GS) pay system covers most employees and is divided into 15 grades, each of which has 10 steps. Entry-level hiring into a grade normally is done at step 1, although various personnel flexibilities allow hiring at different steps. The grade level of an initial hire depends largely on the occupation, as does the career progression up through the grades.
Raises for general schedule employees are set annually in the congressional budget process. Early in the year the President recommends a figure for the following January. Congress considers the amount through the spring and summer. The President makes a formal recommendation in late August, reflecting either the original recommendation or some other figure, often the one under the most active consideration in Congress at the time. Congress can change the figure through action in spending bills or let the White House recommendation take effect.
Under the 1990 Federal Employees Pay Comparability Act, annual GS raises are supposed to be largely automatic, consisting of two parts—an across-the-board component and locality pay. The former part is supposed to be set according to the Employment Cost Index measure of private sector wage growth, minus a half percentage point. Locality pay was supposed to be granted in amounts sufficient to close the pay gap with the private sector over a schedule ending in 2002. Locality pay amounts are calculated from figures compiled by the Labor Department and reviewed by a labor-management council and then by top officials of that agency and the Office of Management and Budget and the Office of Personnel Management.
However, due to budget concerns that system never has worked as designed, with the result that the indicated pay gap with private industry has remained about the same as at the time the law was passed. In most years a combination of across-the-board and locality pay has been paid, but well below the figures indicated by the pay comparability law. In most recent years the federal raise in actual practice has been linked to the increase for uniformed military personnel in the name of maintaining parity between the two groups. Typically this has resulted in an across-the-board component linked to the ECI figure, with the additional amount, often around 1 percentage point, divided up as locality pay.
General Schedule (GS) Locality Pay
Locality pay has caused variation in pay for equally graded jobs among the areas, however. Pay in the highest-paid locality, San Francisco, now exceeds the pay in the lowest-paid locality, the “rest of the U.S.,” by about 20 percent.
Both the number and the boundaries of the metropolitan locality areas change from time to time. In general, localities are chosen according to the concentration of federal employees there. Thus, some smaller cities are included because of a major federal presence locally such as a large Defense Department base, while some larger cities with smaller federal populations are part of the “rest of the U.S.” locality. Boundaries generally follow standard statistical measures of metropolitan areas but outlying areas may be included based on commuting patterns and certain other factors.
The metropolitan area localities are: Albany, NY.; Albuquerque, N.M.; Austin, Texas; Atlanta; Birmingham, Ala.; Boston; Buffalo; Burlington, Vt.; Charlotte; Chicago; Cincinnati; Cleveland; Colorado Springs, Colo.; Columbus, Ohio, Corpus Christi; Dallas-Fort Worth; Davenport, Iowa; Dayton, Ohio; Denver; Detroit; Hartford, Conn.; Houston; Harrisburg, Pa.; Huntsville, Ala.; Indianapolis; Kansas City; Laredo; Texas; Las Vegas; Los Angeles; Miami-Ft. Lauderdale; Milwaukee; Minneapolis-St. Paul; New York; Omaha; Palm Bay, Fla.; Philadelphia; Phoenix; Pittsburgh; Portland, Ore.; Raleigh, N.C.; Richmond; Sacramento; San Antonio; San Diego; San Francisco; Seattle; St. Louis; Tucson, Ariz.; Virginia Beach; and Washington-Baltimore.
Alaska and Hawaii are separate localities in their entirety. The “rest of the U.S.” locality applies to areas in the contiguous 48 states not included in one of the metropolitan localities plus U.S. territories and possessions including Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.
Locality pay has been extended by administrative action to certain categories of employees outside the general schedule, including administrative law judges, administrative appeals judges, and certain agency-specific occupational series. A listing of those is at the above site. Certain other categories are ineligible for locality pay, including Senior Executive Service, Senior Level and Senior Scientific and Technical employees, who are paid under pay banding systems (see below).
Locality pay is paid according to an employee’s official duty station, not home residence or another station to which he or she is temporarily assigned. It does not apply to federal employees stationed in foreign countries; they may be eligible for various special allowances.
A locality rate is basic pay for the purpose of computing the following benefits or their equivalents under other laws:
- retirement deductions and benefits
- life insurance premiums and benefits
- premium pay and premium pay limitations
- severance pay
- advances in pay
- lump-sum payments for accrued and accumulated annual leave
- post differentials and danger pay allowances
- recruitment, relocation, and retention incentives
- supervisory differentials
- extended assignment incentives
- performance-based cash awards when such awards are computed as a percentage of an employee’s rate of basic pay
- GS pay administration provisions such as promotions, with certain exceptions
- pay administration provisions for prevailing rate employees which consider rates of basic pay under the GS pay system in setting pay, with certain exceptions, and
- grade and pay retention, with certain exceptions.
GS Pay banding
In some agencies, and in some “demonstration projects” within certain agencies, the general schedule pay grades are combined into broad bands, typically of between three to five bands, depending on the nature of the occupation. In pay banding arrangements, managers have greater leeway in setting starting salaries and in advancing employees in pay due to good performance, the acquisition of new skills or other reasons, often without competition. Movement from one band to another generally requires competition.
GS Within-grade increases
General schedule employees are eligible for within-grade increases, unless they are denied for poor performance, after the following waiting periods: 52 weeks for advancement to steps 2-4; 104 weeks for advancement to steps 5-7; and 156 weeks for advancement to steps 8-10. Various special pay authorities allow agencies flexibility in assigning step levels to employees. Also, a “quality step increase” of one step can be awarded under many agency performance incentive programs. Where pay banding is used, within-grade raises are not paid; money that ordinarily would go toward those raises is used for performance-based pay.