A Recently Reconstituted Advisory Panel Is Finally Making Locality Pay Recommendations

The advisory council dedicated to examining issues related to federal employee compensation last week suggested measures to reform locality pay at federal agencies after years of gridlock among its members.

The Federal Salary Council also issued its annual assessment of how federal workers fare compared to private sector employees. It found that federal employees made 22.47% less on average than their private sector counterparts last year. That marks a slight decrease from the average 23.11% pay gap reported in 2020.

Last year, the council, which is tasked with recommending tweaks to the map of locality pay areas and other issues related to federal employee compensation, was unable to make those suggestions, because President Biden had not named three political appointees to the body. The other five seats on the council are held by representatives from federal employee unions. Biden appointed Stephen Condrey to be the council’s chairman and James Llorens and former Office of Personnel Management Director Janice Lachance to serve as members in March.

Each year, the salary council examines whether to add specific regions to the list of locality pay areas based on pay disparity data in those locations. This year, the council recommended that the President’s Pay Agent, a body made up of OPM Director Kiran Ahuja, Labor Secretary Marty Walsh and OMB Director Shalanda Young, create new locality pay areas for Fresno, Calif., and Spokane, Wash. It also recommended that Reno, Nev., and Rochester, N.Y., be added to the list of regions studied by the Bureau of Labor Statistics for possible consideration to become locality pay areas in future years.

The council also recommended that a number of regions that are surrounded by locality pay areas yet remain part of the “Rest of U.S.” pay area be incorporated in existing locality pay areas: Emporia and Greensville County, Va., would be added to Richmond’s locality pay area; Huron County, Mich., would be added to Detroit; and Pacific and San Juan counties, Wash., would be added to Seattle.

The panel also finally issued recommendations on longstanding issues that had been up for discussion for years, but never were resolved because of perpetual disagreement between the council’s union representatives and administration representatives appointed by former President Trump.

Chief among those issues was the question of how to reform the locality pay system for regions where agencies consistently struggle to recruit and retain employees, but do not meet the current criteria to be added to the list of locality pay areas. Under the newly proposed criteria, a candidate region for a locality pay area must have a 7.5% commuting rate for locations in OMB-designated Metropolitan Statistical Areas and Combined Statistical Areas, a 20% commuting rate for locations outside of those areas, and a 20% commuting rate for areas surrounded by different locality pay areas. The biggest change is arguably the elimination of the requirement that a region have at least 2,500 General Schedule employees, a requirement that often created a Catch-22 for some regions, because although they were authorized to employ that many people, they often could not attract that many, in part because of their lack of access to locality pay.

Under the Trump administration, the council also failed to act on how to implement new updates from OMB on its map of metropolitan statistical areas and combined statistical areas, because its presidential appointees wanted to explore whether to rescind some locations’ locality pay area designation to conform with the new map. The council last week endorsed labor representatives’ proposal, which adds locations to locality pay areas under the new map but does not take them away if they would have been excluded by the update.

If the president’s pay agent adopts the council’s recommendations, a total of around 16,000 federal workers would be granted additional pay increases either due to the creation of new locality pay areas or new areas of application for existing pay areas. Another 15,400 employees would move to higher-paying localities due to the change in criteria for becoming a locality pay area, while an additional 1,300 federal workers would benefit from the panel’s proposed adoption of OMB’s new statistical area maps.

Federal employee unions lauded the council’s recommendations, which they said would help reduce the pay disparity between the federal workforce and private sector workers.

“These recommendations would put additional money into the hands of federal employees whose pay lags behind their coworkers,” said Everett Kelley, national president of the American Federation of Government Employees in a statement. “I call on OMB Director Shalanda Young, OPM Director Kiran Ahuja and Labor Secretary Marty Walsh . . . to accept these recommendations.”

“The pay gap is not just a Washington, D.C., problem,” said National Treasury Employees Union National President Tony Reardon. “It exists in cities and small towns across America, where federal employees live and work delivering important services that taxpayers depend upon every day. The council is well aware of the difficulties that federal agencies face competing for workers who frequently find higher salaries in the private sector, which is why this pay gap is a valuable piece of information for our elected officials to consider when setting salaries for the federal workforce.”

The president’s pay agent is expected to issue its decision on the council’s recommendations before the end of the year. Any locality pay areas authorized as part of that report likely would be implemented in time for the 2024 federal employee pay raise.