Location, location

The Office of Personnel Management is putting a hold on changing locality pay areas until the Office of Management and Budget publishes its new list of defined metropolitan areas in June.

The government established the locality pay system under the 1990 Federal Employees Pay Comparability Act. Federal workers in 31 metropolitan areas, ranging from Atlanta and Washington to Huntsville, Ala., receive special locality pay, based on the cost of labor in each city. Outside the 31 areas, federal workers in the 48 contiguous states are covered by the "Rest of the U.S." locality pay category. Locality pay areas are based on metropolitan statistical areas and consolidated metropolitan statistical areas that OMB defines according to population size and density and commuting information.

"They are not really meant to be pay areas, but the [Federal Salary Council] said these already exist, they are big, they are used for commuting patterns, let's use these," said Allan Hearne, OPM's team leader for locality pay. The Federal Salary Council, an OPM-run group of government officials and federal union leaders, makes an annual recommendation about locality pay areas to the President's Pay Agent, which includes OPM Director Kay Coles James, Labor Secretary Elaine Chao and OMB Director Mitch Daniels. The pay agent then recommends a course of action to the president.

Usually, locality pay areas would automatically change with OMB's metro area changes, but because OMB will use information from the 2000 census in determining this year's metro area changes, the pay agent has decided to hold off on making changes to locality pay areas until the new OMB information is available for review.

"The Federal Salary Council, knowing OMB was going to be changing its program, decided it was best to freeze the locality pay areas where they are right now and wait until the new OMB areas are published, review them and then decide whether to use the new methodology, stick with the old [areas] or come up with their own methodology," said Jerry Mikowicz, manager of OPM's salary and wage systems group.

After OMB publishes the definitions, the salary council will review the new metro areas and make its recommendation to the pay agent around October. The salary council is also reviewing the structure of the locality pay system, the number of locality pay areas, the precision of pay gap measurements and the salary surveys used to estimate locality pay differences.

Critics of the locality pay system say it doesn't accurately portray pay differences among occupations. Standard locality rates mask the widely varying salaries that different types of professional employees can demand. Critics have also questioned the methodology used to estimate the pay gap.

The move by OPM will not affect current locality pay areas or rates.