As Lawmakers Talk Big Pay Raises, Managers Bemoan Pay Compression

As Congress begins consideration of what could be the largest pay raise for federal workers in 20 years in 2023, some federal workers near the top of the General Schedule pay scale say the debate will have no impact on their paychecks.

In March, President Biden proposed an average 4.6% pay increase for federal employees, which would mark the largest since 2002. Biden has not specified how the 4.6% figure would break out between across the board increases to basic pay and average increases in locality pay, although traditionally 0.5% has been set aside for the latter.

But some lawmakers, including more than 60 in the House, are urging appropriators to overrule the president’s plan and implement a 5.1% pay raise next year. Legislation introduced in January by Rep. Gerry Connolly, D-Va., would increase basic pay by 4.1%, and provide an average 1% increase in locality pay.

However, for a growing number of federal managers and other employees in technical fields, the debate is a moot point: they’ll likely only be getting the 4.1% boost to basic pay no matter what. That’s because the federal pay cap prevents them from receiving more than the across-the-board increase to basic pay.

For General Schedule employees, the federal pay cap for basic and locality pay combined is set at the Executive Schedule Level IV pay rate, which in 2022 is $176,300. According to a February report from the Congressional Research Service, the pay cap caused federal workers in 30 different locality pay areas to see less than the 2.7% pay raise implemented by Biden in January.

The longstanding issue is no longer impacting those at the very top—GS-15 step 10s—either. There are 18 different locality areas where multiple steps within the GS-15 pay grade are all making $176,300 this year, and in the San Francisco Bay area, not only are GS-15 steps 4 through 10 all hitting the pay cap, so are employees at step 10 of the GS-14 grade.

The Federal Managers Association has been working to alleviate this issue for years, thus far unsuccessfully. A 2020 briefing document from the organization noted that GS-15 step 10s in Washington, D.C., were already making $15,000 less per year than they would have without the pay cap.

“While federal employees in areas such as San Francisco, New York City, and Washington, D.C., have been impacted for many years, employees in North Carolina, Georgia, Oregon and elsewhere across the country are feeling the effects as well, and the problem grows every year,” the group wrote. “This issue can and will play a role in recruitment and retention to the federal workforce, which already has hiring issues. If an employee is offered a promotion at a higher level, with more responsibilities, but no corresponding salary increase, will they take on a new role? Technology employees who are now capped may be tempted to leave the government for the private sector, where there is no pay cap.”

An FMA member and IRS manager, who declined to be named because he was not authorized by his agency to speak to a reporter, told Government Executive that he has been at the pay cap for several years, and he now thinks of locality pay as a “flat tire that’s pretty much falling off the wheel.”

“We’re seeing it in high-cost cities like San Francisco and New York—the GS-15 is just not as attractive as it once was, because it’s pretty much the same pay as a GS-14, but with more responsibilities,” the member said. “Grade 15s are senior managers or people in highly technical positions, and these people now have to decide whether they want more responsibilities with no pay incentive.”

The IRS manager recognized at this point Congress can’t just get rid of the pay cap without granting some feds five-figure raises, but suggested finding some way to at least give those feds the same locality pay bumps as everyone else.

“So if President Biden has a 5% raise and that’s with locality pay factored in, so maybe on average [the locality pay] is 1% of that,” he said. “So 4% is what everyone gets, and the people who are capped will only get the 4%, and every year it only gets worse and worse. So at least give them the 1% so you’re not widening that gap further, because eventually it’s going to be too late.”

But it’s unclear whether there is appetite in Congress to adjust how the pay cap works, which is set in statute, aside from annual one-time increases to account for basic pay raises. Connolly, sponsor of the bill to provide what is likely an additional 0.5% increase in locality pay, declined to comment on the issue.