Annual pay raises — FEPCA, comparability, and the ECI.

The 2026 federal pay raise is 1.0 percent across the board with locality pay frozen at 2025 levels — the smallest civilian raise since 2021 and the lowest effective increase in 17 years. That is the headline. The reality underneath the headline is more consequential: the Federal Employees Pay Comparability Act, the statute that has governed federal pay since 1991, would have produced a 3.3 percent base increase plus an average 18.88 percent locality adjustment for 2026. Every president since 1994 has overridden that formula using the alternative pay plan authority. The 2026 override is not unusual in kind; it is unusual only in magnitude.

This article explains how the federal raise is actually determined each year, what the FEPCA formula says, how the Employment Cost Index feeds into it, why the 24.72 percent federal-private pay gap never closes, and how to read the President's Pay Agent report — the document that tells you what you would be paid if the law were enforced as written.

Section I What FEPCA actually says

The Federal Employees Pay Comparability Act of 1990 was enacted to solve a specific problem: the General Schedule was a nationwide pay system that could not compete in major metropolitan labor markets. Before FEPCA, the same GS grade and step paid the same in rural Ohio and in Manhattan. By the late 1980s the recruitment and retention consequences of that uniformity were severe enough that Congress built a statutory comparability mechanism into law.

Under FEPCA — codified in 5 U.S.C. 5303 and 5 U.S.C. 5304 — two things are supposed to happen every year:

1. A base pay adjustment tied to the Employment Cost Index, applied uniformly across every grade and step of the General Schedule.
2. A locality pay adjustment set separately for each of the 53 locality pay areas in 2026, designed to reduce the gap between federal and private-sector pay in that area to no more than 5 percent.

The 5 percent target is in the statute. It is not aspirational; it is what the law says GS pay must produce. In the full 36 years since FEPCA passed, this target has not been hit in any locality area in any year after the first implementation year. The reason is not that the formula fails to produce a number — it produces a clear number every year. The reason is that the formula's output has been overridden by every president since 1994 using an authority Congress built into the same law.

Section II The two-part formula — base and locality

Base pay adjustment

The base pay increase under 5 U.S.C. 5303 is determined by the annual change in the Employment Cost Index minus 0.5 percentage points. The ECI is published quarterly by the Bureau of Labor Statistics and measures wage and salary changes across the private economy. For 2026, the ECI-derived base adjustment would have been 3.3 percent. That number appears in the President's Pay Agent report and in OPM's staff work, even though it is not what employees received.

Locality pay adjustment

The locality adjustment under 5 U.S.C. 5304 is calculated separately for each locality pay area. OPM — working with the Federal Salary Council and the President's Pay Agent — measures the gap between federal and non-federal pay for comparable work in each area using Bureau of Labor Statistics data. The statute then requires the locality rate to be set at a level that closes the gap to 5 percent or less.

For 2026, OPM calculated that an average locality raise of 18.88 percent would have been required to maintain statutory progress toward the 5 percent target. In some of the highest-gap areas, the required increase exceeded 20 percent. No president since 1994 has permitted that formula output to become the locality adjustment; every alternative pay plan since then has capped locality increases well below the formula's prescription.

Section III The Employment Cost Index

The Employment Cost Index is the mechanical input that would drive the base pay adjustment if FEPCA operated as written. It is published by the Bureau of Labor Statistics and measures changes in the total cost of employing civilian workers — wages and salaries plus employer-paid benefits. For federal pay setting purposes, the relevant measure is the private-sector wage and salary component over the September-to-September reference period each year.

The statutory formula takes this ECI change, subtracts 0.5 percentage points, and produces the base pay adjustment. A September-to-September ECI of 3.8 percent yields a base pay increase of 3.3 percent. That is the math for 2026. The 0.5 point haircut is a concession Congress built into FEPCA at the time of enactment — the pay adjustment tracks private-sector wage growth but lags it slightly by design.

The mechanics are straightforward; what complicates them is the alternative pay plan override. The Pay Agent publishes the ECI-derived number every year. Every year the President transmits an alternative pay plan that authorizes a smaller number. The ECI becomes context rather than control.

Section IV The federal-private pay gap

The most important number in federal pay policy is the federal-private pay gap, published annually by the Federal Salary Council. In the most recent council report (November 2024), the nationwide weighted-average gap was 24.72 percent. That is, federal employees on the General Schedule earn on average 24.72 percent less than private-sector workers performing comparable work in the same locality areas.

The gap varies sharply by location:

Locality Area	Measured Gap (2024 FSC Report)	Locality Raise Required to Hit 5% Target
Nationwide weighted average	24.72%	49.11%
High-cost metro areas	30%+ in several areas	Often 60%+
Rest of U.S. (lowest-gap area)	~15%	~20%
2026 actual locality raise	—	0.00%

The gap has widened steadily because locality raises under alternative pay plans have rarely tracked the growth of private-sector pay. In the decade from 2017 to 2026, cumulative GS base pay has risen roughly 20.5 percent while the Consumer Price Index rose approximately 32 percent — a real-wage decline of roughly 11 to 12 percentage points even before accounting for the growing gap with private-sector nominal pay.

Some analysts dispute the 24.72 percent figure. OPM's methodology compares wages and salaries only, while the Congressional Budget Office has argued broader total-compensation comparisons that include federal benefits (which run approximately 43 percent higher than private-sector benefits) close most of the apparent gap. Both analyses have been published; both use different methodologies; neither has been adopted as the controlling legal number. The Federal Salary Council's wage-only measure remains the statutory reference for FEPCA pay-setting.

You can see how the gap plays out at your specific grade, step, and locality using the GS Pay Calculator — it shows what you actually earn at 2026 rates against what FEPCA's formula would have produced.

Section V The alternative pay plan override

FEPCA contains an escape hatch built into the same law that creates the comparability requirement. Under 5 U.S.C. 5303(b) and 5 U.S.C. 5304a, the President may submit an alternative pay plan to Congress by September 1 of any year if the President determines that implementing the formula as written "would be inappropriate because of national emergency or serious economic conditions affecting the general welfare."

That language is rarely taken seriously on its own terms. Every president from Clinton forward has invoked the alternative pay plan authority every single year, through economic expansions, during periods of low unemployment and stable inflation, and in years where no plausible national emergency existed. The authority has effectively become the standard pay-setting mechanism; FEPCA has become the fallback that never happens.

The mechanics:

1. By early September each year, the President transmits an alternative pay plan letter to Congress stating the proposed base adjustment and locality adjustment for the following year
2. Congress has until December 31 to enact different amounts through legislation
3. If Congress does not act, the President issues an Executive Order formalizing the alternative plan rates
4. OPM publishes the final pay tables, and the rates take effect at the start of the first pay period of the new calendar year

For 2026, the sequence ran to its usual conclusion: Trump's alternative pay plan was transmitted August 28, 2025; Congress did not enact legislation modifying it; Executive Order 14368 was signed December 18, 2025; OPM published the pay tables; and the 1.0 percent base increase took effect with the first pay period of 2026 on January 11.

Section VI How the 2026 raise was set

The 2026 pay adjustment has three distinct tracks worth understanding separately.

The Executive Schedule ceiling rose from $195,200 in 2025 to $197,200 in 2026 (1.02 percent increase), which is the cap that limits GS-15 Step 10 in high-locality areas and several other senior pay ranges. The SL/ST minimum rose to $151,661. ALJ rates rose 1.0 percent across the board, with AL-1 at $197,200, AL-2 at $192,400, and the AL-3/A through AL-3/F range from $131,700 to $182,400.

The most important point about 2026: the base rate adjustment and the locality freeze combine to produce a raise that, for GS employees in higher-locality areas, has close to zero purchasing-power effect once inflation is factored in. An employee in Washington-Baltimore or San Jose-San Francisco received the 1 percent base but no locality adjustment, while private-sector wages in those same areas continued to rise. The gap grew.

Section VII Reading the Pay Agent report

The single most authoritative document on federal pay policy each year is the President's Pay Agent report. The Pay Agent is a three-member body consisting of the Secretary of Labor and the Directors of OMB and OPM, charged by statute with recommending annual pay adjustments. The report is typically published in late fall before the following year's rates take effect.

What the Pay Agent report tells you:

• The measured pay gap in every locality area based on the most recent BLS data
• The FEPCA-derived locality raise that would be required to close each area's gap to the 5 percent statutory target
• The cost estimate for full FEPCA implementation — approximately $24 billion in the first year for 2026
• Any methodological concerns the Pay Agent has identified with how the gap is calculated
• The Federal Salary Council's recommendations and the Pay Agent's response to them

The Pay Agent report does not set the raise; it reports what FEPCA would require. The alternative pay plan announcement from the White House typically follows the Pay Agent report and overrides it. The two documents read together give the clearest possible picture of the gap between federal pay law and federal pay reality.

Both the current and prior-year Pay Agent reports are published on OPM's Pay Agent Reports page. For employees following pay policy closely, these are worth reading in full each year.

Section VIII What to watch for 2027

The 2027 raise will begin to take shape in the spring and summer of 2026. Three things are worth tracking.

The FY 2027 Presidential budget request. If the budget proposal is silent on a federal civilian raise — as the FY 2026 budget was — the default expectation is low or zero. If it specifies a number, that becomes the baseline for negotiation.

The 2026 Pay Agent report, typically released November or December 2026. This will show the measured pay gap after another year of frozen locality pay, and the FEPCA-required locality adjustment to close it. Given the 2026 freeze, the measured gap has near-certainly widened and the required closure percentage has grown.

Congressional activity. The FAIR Act and similar legislative proposals have pushed for raises in the 4.3 percent range. None has become law in recent years, but election-year dynamics and the budget appropriations process sometimes produce outcomes that alternative pay plans alone would not. Watch whether the FAIR Act or a successor is attached to the annual appropriations vehicle.

Section IX Frequently asked questions

See what your 2026 paycheck says.

The GS Pay Calculator uses the 2026 pay tables and your locality to show your annual, biweekly, and hourly pay at your exact grade and step.

Open the GS Pay Calculator