Federal Report

4 ways federal pay has changed in the last year

Although OPM has made various tweaks to the federal pay system — such as removing a cap on higher pay rates, and shifting the onus for approving pay bonuses �...

Drew Friedman@dfriedmanWFED

January 1, 2024 3:31 pm

6 min read

Throughout the last year, federal employees saw a number of tweaks to the federal pay system, thanks to several proposals from the Office of Personnel Management.

Most recently, federal employees who work temporarily above their pay grade will soon get paid at a higher rate for longer, according to a Dec. 27 proposed rule from OPM.

Generally, agencies can assign employees work that’s technically meant for more senior feds. And in those instances, employees working above their pay grade do get paid more. But currently, there’s a 120-day cap on how long feds can receive a higher pay rate — even if the work extends beyond that four-month period.

Under OPM’s new proposed rule, both bargaining unit and non-bargaining unit workers would be paid at a higher rate for the entire duration that they perform the work of a higher-graded position.

The proposed rule comes after the National Treasury Employees Union (NTEU) petitioned OPM and called on the agency to address what the union said was “significant unfairness” for employees performing more senior-level work. The National Federation of Federal Employees (NFFE) similarly called on OPM to address the issue in 2022.

More than 20 years ago, federal employees were often given full backpay when told to perform senior-level work, without a cap on how long they could receive the higher pay rate.

But a decision from the Federal Labor Relations Authority (FLRA) in 2004 — based on an advisory opinion from OPM at the time — added a 120-day cap for the higher pay rate.

The new proposed rule aims to correct what NTEU said is an error in the interpretation of the regulations.

“OPM believes the proposed modification is a reasonable solution to address those situations where an agency may assign higher-graded duties to an employee without using competitive procedures and where a collective bargaining agreement requires a temporary promotion,” OPM said in its proposed rule.

OPM is accepting public comments until Feb. 26 and will subsequently finalize the rule after reviewing any comments.

But beyond these new regulations, there are plenty of other pay tweaks OPM has made in recent months.

Shifting the onus for approving pay bonuses

In a proposed rule from November, OPM figured out a way to offload some transactional work, while also trying to help agencies speed up the federal recruitment process.

OPM’s proposal specifically focused on the procedures for offering recruitment and relocation pay incentives for federal employees.

Currently, agencies can offer annual pay bonuses equal to 25% of an employee’s base salary for up to four years — without the need to go through OPM. Agencies can also offer larger bonuses, but OPM has to approve the higher rate before an agency can pay it out.

Now, OPM is proposing to transfer the required sign-off for approving the higher pay bonuses instead to individual agencies. After getting a signed waiver, agencies can approve annual bonuses of up to 50% of an employee’s base salary for two years.

The proposed rule, in other words, would increase the size of bonuses that agencies can internally approve for their own employees.

The goal, in part, is to “reduce administrative burden on agencies and increase the efficiency of using recruitment and relocation incentives,” OPM said.

Banning the use of salary history in hiring

Earlier in 2023, OPM proposed another tweak to federal pay, this time to address potential pay inequities that can occur during the hiring process.

An OPM proposal from May aimed to bar agencies from using a federal job candidate’s previous salary history when setting pay as part of an employment offer.

The goal is to address a pay disparity between men, and women and racial minorities, in the federal workforce.

Currently, OPM’s regulations do not require job applicants to share their salary history for an agency to make a hiring decision. But the regulations do let agencies request an applicant’s salary history, and then use that information to help set the applicant’s starting pay rate.

“Relying on a candidate’s previous salary history can exacerbate preexisting inequality and disproportionally impact women and workers of color,” OPM Director Kiran Ahuja said.

Under OPM’s proposal, agencies would not be allowed to consider an applicant’s salary history at all when setting pay for newly appointed federal employees.

While the gender and racial pay gaps in government are smaller than those in the nationwide workforce, OPM’s proposed regulations were a step toward the agency’s goal of completely closing the pay gap in the federal government.

Creating new regions for locality pay

Additionally, some 33,300 federal employees are about to see higher paychecks, due to OPM’s finalization of four new locality pay areas, as well as the inclusion of various new counties to existing localities.

The new localities are:

Fresno-Madera-Hanford, California
Reno-Fernley, Nevada
Rochester-Batavia-Seneca Falls, New York
Spokane-Spokane Valley-Coeur d’Alene, Washington-Idaho

Previously, federal employees working in these areas were part of the “rest of U.S.” locality pay area. Under the new localities, they’ll receive higher pay raises than the average 5.2% for 2024.

Federal News Network has detailed more of the intricacies and history of locality pay in this story.

A desire for broader reforms remains

Although OPM has pushed forward attempts to fix several areas of the often-complicated federal pay system, larger problems still lie ahead.

For years, the President’s Pay Agent — a three-person panel of government pay leaders — has called for “major legislative reforms” to a pay system that many say has been broken for decades.

Many annual pay agent reports have pointed to flaws in the current locality pay system.

“The current pay comparison methodology used in the locality pay program ignores the fact that non-federal pay in a local labor market varies substantially between different occupational groups,” the pay agent said in its October 2023 report. “As currently applied, locality payments in a local labor market may leave some mission-critical occupations significantly underpaid while overpaying others.”

Other advocates of federal pay reform, such as the Government Managers Coalition (GMC), have called specifically for a fix to pay compression as well. A pay cap affects senior-level feds on the General Schedule and in the Senior Executive Service (SES), since their pay cannot exceed that of Level IV on the Executive Schedule. Pay compression impacts more and more feds each year.

GMC’s leaders warned that pay issues will only worsen until the administration proposes reforms for the federal government’s various pay systems and to address pay compression.

In its budget request from March 2023, the Biden administration hinted at a goal of fixing pay compression. But there is not yet a proposal publicly available from the administration.