How GS locality pay is set

Every General Schedule employee is paid from a locality table, not from the base schedule. The percentage that separates the two is set each year by a process written into title 5 by the Federal Employees Pay Comparability Act of 1990. This page walks through that process; how GS pay works covers the structure the percentage is applied to.

The idea: a pay disparity

Section 5304 directs that “pay disparities” between General Schedule rates and non-federal pay for the same levels of work be identified locality by locality and reduced. A comparability payment is owed in any locality where the disparity exceeds 5 percent. The payment is a single percentage for the locality, applied uniformly to every GS position in it, and it counts as basic pay for retirement, life insurance and premium pay.

Who measures it

The statute has the President designate a pay agent. OPM’s page records that Executive Order 12748 named three officials jointly: the Secretary of Labor and the Directors of OMB and OPM, known as the President’s Pay Agent. The Pay Agent submits an annual report, due at least 13 months before the calendar year it covers, that compares GS rates with non-federal rates in each locality on the basis of surveys the statute assigns to the Bureau of Labor Statistics, identifies each locality with a disparity and its size, and recommends comparability payments.

Alongside the Pay Agent sits the Federal Salary Council, which the statute fixes at nine members: three chosen for impartiality and expertise in labor relations and pay policy, and six representing employee organizations with substantial GS membership, no more than three from any one organization. The Pay Agent must meet with the Council and consider its views on four things: which localities exist, how the BLS surveys are designed, how the comparison is made, and what level of payment should follow. Those views go into the Pay Agent’s report.

How areas are drawn

The Pay Agent defines the pay localities. The statute’s constraints are few: every GS position in the United States and its territories must fall in some locality, and boundaries must rest on appropriate factors, which may include local labor market patterns, commuting patterns and the practices of other employers. Adding or changing a locality is done by regulation with notice and comment. OPM publishes the resulting county-by-county definitions, and this site’s locality pages list the areas with their current percentages, including the “Rest of U.S.” area that covers everything not inside a named one.

The schedule the law wrote, and the one that applies

Section 5304 contains a phase-in: in the first year payments were made, the percentage had to close at least one-fifth of the gap above 5 percent, rising by steps to the full amount by the ninth year and every year after. The statute also lets the President set a level higher than the minimum, up to eliminating the disparity entirely.

Section 5304a, added by the same 1990 Act, supplies the other direction. If the President finds the formula level inappropriate on the same two grounds the base-pay statute names, national emergency or serious economic conditions, he may fix an alternative level by sending Congress a report at least one month before the payments would otherwise take effect, stating the alternative and the reasons. In a year with an alternative plan, the percentages in the published tables come from that plan rather than from the Pay Agent’s arithmetic. Either way the tables take effect with the first pay period on or after January 1.

The cap

A locality rate may not exceed the rate for level IV of the Executive Schedule. In the highest-percentage areas that limit reaches the top steps of GS-15, and OPM marks the capped cells. The Executive Schedule page shows the level IV figure and which areas hit it. Certain non-GS positions that receive locality pay by regulation carry a level III limit instead.

Locality pay and the annual raise

The locality percentage and the across-the-board adjustment under section 5303 are separate decisions. Section 5304 states that comparability payments are not taken into account in the section 5303 adjustment, which is why a January pay change is reported as two numbers: the base increase and the locality increase. How the federal pay raise is set covers the first.

Compared with OEWS

The BLS surveys behind the Pay Agent’s report measure non-federal pay for defined levels of work; the occupation and state tables here measure what employers pay for an occupation across all levels. A locality percentage is a policy outcome built on survey data; a metro median is a survey estimate. The two should not be expected to agree.