Salary Council Recommends Locality Pay Area Changes

An advisory board tasked with examining pay disparities between the federal government and the private sector recently recommended introducing one new locality pay area and expanding an existing pay area.

A recently published report from the Federal Salary Council, dated May 2, recommends that Des Moines, Iowa, become a new locality pay area, and that Imperial County, California, be added to the Los Angeles locality pay area.

The salary council, which issues recommendations each year to the President’s Pay Agent, wrote that Imperial County is a unique case. Ordinarily, a location can be added to an existing locality pay area only if at least 400 General Schedule federal workers live or work there, and if there is an employment interchange rate—a measure of how many people commute from one area to the other for work—of at least 7.5%.

Imperial County easily meets the employee threshold, but because it sits between Los Angeles and San Diego, it only meets the 7.5% employment interchange threshold by combining the statistic for both of the cities. The council elected to add the county to the Los Angeles locality pay area because it has higher “economic integration” with that city.

As a whole, the council found that federal workers earn on average 31% less than their counterparts outside the federal government, according to analysis by the Office of Personnel Management and the Bureau of Labor Statistics. But the board’s three political appointees argued it is time for policy makers to develop a new methodology for calculating pay disparities, and suggested the administration should introduce legislation to allow the salary council to consider “total compensation,” including non-salary benefits, in its measure of pay disparities.

“We agree with the pay agent that an aggregation of both salaries and certain benefits would be a far more credible measure of the comparability between federal and non-federal compensation,” wrote Chairman Ronald Sanders and members Jill Nelson and Katja Bullock. “[We] believe that the benefits of adding ‘total compensation’ in assessing the federal government’s ability to recruit and retain talent are important enough to warrant further, in-depth study by the pay agent. We understand that there is no statutory provision for measuring total compensation to set GS pay, but we believe there should be.”

These comments were not the formal recommendation of the salary council, as the four members of the board representing federal employee unions strongly oppose changes to the current methodology, particularly any effort to add non-salary benefits to the equation.

“This year’s workgroup report [on compensation methodology], however, is a clear attempt to politicize what has been for the last 26 years a technical, apolitical report that has followed the law’s instructions regarding measurement of pay disparities and boundaries of pay localities,” the union members wrote. “[The] members of the workgroup and Federal Salary Council from the employee organizations . . . did not support the chairman’s effort to use the council to promote the administration’s policy agenda of redefining ‘pay disparities’ to include non-pay benefits or replacing the locality pay system with one that varies pay adjustments by occupation or manager discretion.”

A less controversial change, which got the support of the entire council, was to require regions seeking an exception to be included in a locality pay area to provide a series of human capital indicators to help justify difficulties in employees’ meeting the cost of living or struggles in recruiting and retaining workers.

Such indicators could include statistics on the number of authorized and open General Schedule positions in recent years, data on the number of federal workers who quit or retired, as well as the time needed to fill vacant positions.

The recommendations, and discussion of issues the council could not agree on, will be forwarded to the President’s Pay Agent, which is composed of the Labor secretary and the directors of the Office of Management and Budget and Office of Personnel Management. The Pay Agent will make a decision later this year. Any effort to include non-salary benefits in pay disparity calculations likely would require legislation.