Pay Raise For Federal Employees in 2023

If you are a federal employee, you may be wondering how much extra money you can expect to see added to your paycheck next year. President Biden signed an executive order Friday boosting pay for civilian federal workers by 4.6%.

The raise is part of an annual pay adjustment that federal employees get through the Federal Employees Pay Comparability Act (FEPCA). It includes an across-the-board increase and a locality pay adjustment.

Basic Pay Increase

The Office of Personnel Management announced that civilian federal workers will get an average 4.6% pay raise in 2023, the largest since 2002. The raise, which is effective January 1st, will give workers across the board boosts in their basic pay and locality pay, according to the agency.

The increase is part of a package of budget and pay changes for federal employees. It also includes a freeze on senior political officials’ pay.

President Biden formalized the plan in a letter to congressional leaders last week. He said that the pay increase will help keep federal agencies competitive with the private sector and attract and retain new talent.

The pay raise applies to most civilian federal employees who are paid under the General Schedule (GS) pay scale. This system covers many professional, technical and administrative white-collar positions. GS employees receive pay in steps, or grades, that are earned based on time in service and work performance.

Locality Pay Increase

Federal employees on the General Schedule (GS) pay scale will get a 4.6% average pay raise in 2023, split between an across-the-board 4.1% basic pay increase and an additional 0.5% locality pay boost. The average total is higher than the 3.6% increase in 2021, reflecting the rise in inflation and cost of living.

The new federal pay raise will be applied to most civilian and armed service workers beginning January 1st. A 0.5% boost to locality pay will help to close the gap between federal and non-federal salaries, as well as eliminate the yearly disparity in base pay between military personnel.

In addition to increasing the base pay of federal employees on the GS pay scale, President Biden has also expanded locality pay to include those working in Alaska and Hawaii. This is a welcome change that will make a difference to the long-term federal workforce and those living in these areas, as well as to the tens of thousands of federal workers who live outside the 50 city zones.

Special Rate Increase

The federal government has a unique pay system. Known as the General Schedule, it sets pay for employees on the GS payroll at a series of 10 steps and for many federal employees in a particular geographic area at a locality level.

The President and the Office of Personnel Management have authority to establish special rates for employees in certain high-pay areas where recruiting or retention problems are difficult to address. These rates are designed to address specific handicaps in attracting and retaining qualified workers, such as higher private wages, hazardous working conditions, geographic remoteness, or other circumstances that the President or OPM considers appropriate.

Unlike basic pay, which is established by law, special rates are set by OPM at the request of an agency that needs them to staff its mission. The authorized agency official submits a request to OPM that includes a certification by the authorized agency official that the requested special rates are necessary to accomplish the agency's mission.

Retirement Benefits

Federal employees are covered by the Civil Service Retirement System (CSRS) or the Federal Employees’ Retirement System (FERS). Both systems provide a basic pension benefit and long-term disability benefits, and both programs also offer survivor and former spouse benefits.

A federal employee’s retirement benefit depends on many factors, including age and years of service. For example, a worker with 20 years of service who retires at age 62 will receive an annuity equal to 29% of his or her high-three average pay.

Workers can increase their retirement benefits through a number of programs. One is the Federal Employees' Thrift Savings Plan, or TSP. Each pay period, employers contribute 1% of an employee's salary to the TSP, and agencies match the employee's contributions up to 5%.

The government also provides other types of retirement benefits, such as a flexible spending account and life insurance. For more information, visit the Office of Personnel Management’s retirement services page.