How the federal pay raise is set each year

Each January the General Schedule base table changes by a single percentage applied to every cell. Where that percentage comes from is less obvious than it looks, because the statute writes one formula and allows two ways to depart from it.

The statutory formula

Section 5303 of title 5 says that, effective with the first pay period beginning on or after January 1, the rates of basic pay in each statutory pay system rise by a percentage equal to the increase in the ECI minus one-half of one percentage point, rounded to the nearest tenth. Section 5302 defines the ECI as the Employment Cost Index for wages and salaries of private industry workers, published quarterly by BLS, and the “base quarter” as the three months ending September 30.

The comparison is lagged. The adjustment for a given year uses the ECI change between the base quarter of the year before the preceding year and the base quarter two years before that. For a January adjustment, in other words, the formula reads the ECI release from roughly fifteen months earlier. The ECI trend page shows the series; wage growth and the ECI explains what it measures.

The half-point offset is part of the design: the formula deliberately delivers slightly less than measured private wage growth. The result applies to the base schedule only; the statute says comparability payments are disregarded, and the locality percentages are a separate decision described in how GS locality pay is set.

The alternative plan

Subsection (b) lets the President set aside the formula. If, because of national emergency or serious economic conditions affecting the general welfare, the President considers the formula adjustment inappropriate, he must send Congress, before September 1 of the preceding year, a plan for an alternative adjustment with his reasons, and then adjust pay according to that plan on the same January date. The statute lists what he is to weigh when invoking economic conditions: the leading economic indicators, gross national product, unemployment, the budget deficit, the consumer and producer price indexes, the ECI itself and the personal consumption deflator. The plan must include an assessment of how the alternative will affect the government’s ability to recruit and retain qualified employees.

When an alternative plan is submitted, that late-August letter to Congress is the first official statement of the next year’s number. The locality side has its own parallel authority with a later deadline.

Congress

Nothing in section 5303 prevents Congress from legislating a figure directly, and it has done so in appropriations law. OPM’s SES compensation page records one instance: section 147 of the Continuing Appropriations Act, 2011, as amended, prohibited statutory pay adjustments for most federal civilian employees for a period, along with basic pay increases for senior executive and senior-level positions. When Congress writes a number, that number controls over both the formula and any alternative plan.

What the adjustment does and does not change

The new rates supersede the old ones and are printed in the Federal Register and the Code of Federal Regulations. The statute states that an increase under section 5303 is not an “equivalent increase” for purposes of within-grade step increases, so a January raise does not reset anyone’s waiting period for the next step. It also caps the result: pay by reason of this section, disregarding locality, may not exceed level V of the Executive Schedule. The separate level IV ceiling on locality rates is covered on the Executive Schedule page.

The adjustment reaches every “statutory pay system,” a term that covers the General Schedule, the Foreign Service schedule and the Veterans Health Administration physician and dentist schedule. The Senior Executive Service, senior-level positions and the Executive Schedule itself are adjusted under their own sections; see SES, SL/ST and Executive Schedule pay caps. Military basic pay follows a similar but distinct formula in title 37, described in how the military pay raise is set.

On this site

The federal pay hub states the across-the-board increase incorporated in the current base table, taken from OPM’s published tables, and every locality page carries its effective date. The site does not forecast next year’s figure. For context, the occupation tables show what the wider labor market pays for comparable work, and the state tables show where federal pay sits in each state’s distribution; neither moves on a January schedule.