How Are 2023 GS Pay Scales with Locality Calculated?Pay & Benefits
For Civilian Federal Employees, the end of the calendar year marks a possibility for changes to General Schedule (GS) Pay Scales. Understanding how the system works can help you make better financial decisions for you and your family. This knowledge also allows you to make an informed career decision when comparing positions or considering a transfer. To help you make sense of it all, WAEPA has compiled a guide to GS Pay Scales.
New for the 2023 GS Pay Scales
The White House announced their proposal for a 4.1% average increase in Federal wages, along with a 0.5% increase for locality pay, for a 4.6% total average increase. This is the largest pay raise for Federal employees in 20 years. President Biden signed an executive order on Friday, December 23, 2022, making the pay raise official. This plan will take effect January 1, 2023.
Additionally, the Federal Salary Council also recommended a list of new locality pay areas and adjusments. These changes would impact nearly 30,000 federal employees:
- Establish Fresno, California and Spoken, Washington as new locality pay areas
- Add new pay locality areas for Reno, Nevada and Rochester, New York
- Expand the Richmond (VA), Boston, Detroit, and Seattle localities
- Emporia and Greensville County, Viriginia to the Richmond locality
- Dukes and Nantucket counties, Massachusetts to the Boston locality
- Huron County, Michigan to the Detroit locality
- Pacific and San Juan counties, Washington to the Seattle locality
How Are GS Pay Scales Calculated?
The United States Office of Personnel Management (OPM) uses three factors to calculate GS pay scales. This system applies to most Civilian Feds under the General Schedule, unlike those who are paid under the Executive and Senior Level Pay Tables.
Factor 1: GS Pay Grade
The GS Pay Grade system includes 15 categories of pay ranges. GS-1 is the lowest, and GS-15 is the highest. Jobs are assigned to a grade based on the level of responsibility, requirements, and other factors. For example, a position that requires a high school diploma but no experience in that field may be a GS-2 position. A position that requires a master’s degree is usually a GS-9.
Factor 2: GS Pay Step System
The GS Pay Step system divides each pay grade into 10 steps. Each step is worth about 3% of the employee’s salary, so the higher the step, the higher the salary. When an employee gets a promotion or reaches a new level of seniority, they move to a higher step. In general, it takes 18 years to move from the lowest to the highest step within a single grade.
Factor 3: Locality
Locality relates to the region where the employee works. This factor adjusts the base rate of pay for the cost of living in a geographic area. While each position is assigned to a specific grade, and each employee is assigned to a step within that grade, the pay rate will vary by location. This way, the system accommodates the needs of workers in more expensive areas, such as California or major metropolitan areas.
While the system may seem complicated, these three factors help address the most fundamental questions involved in compensating a workforce:
- The differences between positions in terms of responsibilities, difficulties, requirements, etc.
- The need to compensate long-term workers for their service.
- The cost-of-living differences when the workforce is located all over the country.
How Is the Locality Adjustment Calculated?
Of the three determining factors, locality adjustments can be the most complicated to predict. The amount of the adjustment is calculated as a percentage rate based on data from the United States Bureau of Labor Statistics Annual National Compensation Survey. The tool gathers data on compensation from government and non-government sectors in locations all over the country. This information is then compared to the base pay of federal employees in similar positions to calculate the locality pay adjustment factor.
The Office of Management and Budget (OMB) currently has 53 locality areas for OPM to use in setting locality adjustments for all 50 states and all United States territories and possessions. OMB uses defined Metropolitan Statistical Areas and Combined Statistical Areas for this purpose. Hawaii and Alaska have their own pay scales, and 51 other locality areas center on major metropolitan areas. Locations inside the continental United States that don’t fall into an established locality area are grouped as “Rest of United States.”
Year over year, OPM recommends changes as needed. The President recommends wholesale adjustments to the pay scales, and they are then approved by Congress each year. Federal employees in foreign locations are not subject to this locality adjustment system.
How Can I Use the Locality Pay Adjustment Factor Information?
Civilian Feds often earn more because of the locality pay adjustment factor. You can find the adjustment rate for your locality by visiting the locality area pay definitions published by OPM. This tool is also useful if you’re considering applying for a similar position in a different part of the country; you can estimate how much higher or lower the pay might be in a new location.
One of the most important reasons to thoroughly understand your current and future compensation is to calculate your family’s insurance and benefits needs. WAEPA (Worldwide Assurance for Employees of Public Agencies) offers handy calculators to help you determine how much life insurance coverage you should consider to help protect your family’s peace of mind.
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