Pay raises are important to Federal employees because they help them keep up with the cost of living and provide incentive to attract and retain workers. A pay increase must be performance-based and aligned strategically toward recruiting, retaining and rewarding high-performing federal employees and those with critical skill sets.
The President's plan calls for a 4.6% pay raise for civilian federal employees, which is the largest in 20 years and more than doubles last year's 2.7% average boost. Additionally, the plan includes a 0.5 percent locality pay adjustment.
Cost of Living Adjustment (COLA)
The Cost of Living Adjustment (COLA) is an increase in salary that may be given to employees to make up for inflation. The adjustment is based on the Consumer Price Index or other standardized inflation rates.
Most federal employees get pay raises each year. These raises are determined by a formula that links to labor market conditions and the President’s budget recommendation for pay increases.
Locality-based adjustments are granted in areas where the pay difference between federal and non-federal pays exceeds five percent.
Inflation can affect how much money retirees receive, especially when their fixed incomes are based on pensions or government benefits. Providing these retirees with a COLA can help them retain their purchasing power as the cost of basic items like food, housing, clothing, health care, and taxes continue to increase.
If you’re a federal employee or are considering retiring in the future, contact us today to learn more about your retirement options and how you can protect your income as prices rise. We’ll also provide you with a free benefits workbook that will guide you through all of the options available to you.
General Schedule (GS)
The General Schedule (GS) is the pay scale used to set salaries for most federal jobs. It has 15 grades and ten steps within each grade.
GS employees typically start at step 1 of their assigned grade and move to a higher grade as they gain experience and qualifications. Agencies have discretion to authorize new GS employees to be employed at a higher step rate in certain cases, such as when the agency needs the position and if the employee has superior qualifications.
Generally, GS employees receive a yearly across-the-board base pay raise of 4.1% plus a locality pay adjustment. The amount of this locality pay adjustment varies based on survey comparisons of private sector wage rates and federal pay in a geographic area.
Locality Pay
Locality pay is a factor that affects federal employees who work in different areas of the country. It was created by the Federal Employee Pay Comparability Act of 1990 to reflect the difference in pay levels between federal employees and private-sector workers in metropolitan areas.
The federal government uses comparisons of non-Federal pay rates to determine locality pay in 53 designated locality pay areas and a 54th catch-all pay area called "Rest of U.S." The President's pay agent just approved four new locality pay areas, but they won't be in effect until 2024 at the earliest.
The Bureau of Labor Statistics conducts annual surveys of wages and salaries paid by non-federal employers in a particular labor market. It compares GS pay to those salaries and calculates the locality pay adjustment rate. The adjustment basically equals the gap between GS pay and non-Federal salaries in a given locality pay area.
Retirement
Many workers who have spent a lifetime working face a difficult retirement. The prospect of no longer having to worry about deadlines and performance evaluations is appealing, but it can also be a source of anxiety for those who aren't prepared or don't have enough savings to make it through the first few years.
One of the most common sources of retirement income is a pension plan. Employers guarantee their employees a monthly payment after retirement that is determined by earnings and years of service.
The Federal Employees Retirement System (FERS) provides a pension based on an employee's length of service, average pay and formulas involving multipliers. A FERS basic benefit is a monthly income that is calculated by multiplying an employee's average basic pay by the number of years of creditable service supplemented by unused sick leave.
A civil service annuity is another type of retirement benefit. It is paid to federal employees enrolled in the Civil Service Retirement System (CSRS) and those who are eligible under CSRS Offset.