Have you ever wondered how the General Schedule (GS) pay tables are updated every year by the Office of Personnel Management (OPM) but could never navigate through the various calculations needed to fully understand this process? The first step in the process is updating the GS non-locality pay table, and Part 1 of this three-part series discusses that process.
How the General Schedule 2018 Nonlocality Pay Table is Created
By law, GS pay in all geographic locations is increased across-the-board based on nationwide changes in the cost of non-federal salaries as reflected by the Employment Cost Index (ECI). However, the President has authority to issue an alternative across-the-board increase, and he exercised that authority for 2018, ordering a 1.4 percent increase via Executive Order. The 2017 step 1 rate for each grade was increased by this 1.4 percent and rounded to the nearest dollar to derive the 2018 step 1 rates. Each new 2018 step 1 rate was then divided by 30 to produce a standard Within-Grade Amount for each grade. The standard Within-Grade amount is then added to Step 1 to derive the Step 2 rate, added to Step 2 to derive the Step 3 rate, and so forth. GS-1 and GS-2 have some differences in their calculations that will not be discussed here. This two-step process results in the GS 2018 nonlocality base pay table without locality pay. This table is the basis for creating all the GS locality pay tables.
How the 2018 General Schedule Locality Pay Tables are Created
The previous section described the process that occurs each January to update the General Schedule (GS) non-locality pay table. This section describes how the GS locality pay tables are created. Most GS employees are entitled to locality pay. Many people believe that locality pay is meant to compensate for the higher costs of living in various parts of the country. In fact, locality pay is based on a percentage rate that reflects pay levels for non-federal employees in different geographic areas as determined by pay surveys conducted by the U.S. Bureau of Labor Statistics. The D.C. area locality pay percentage increased from 27.10 percent in 2017 to 28.22% in 2018 based on these salary surveys. Each salary figure on the GS 2018 non-locality pay table was multiplied by 1.2822 to create the 2018 DC area locality pay table, which covers DC and surrounding areas in parts of Maryland, Virginia, West Virginia and Pennsylvania. The locality table construction differs from the GS nonlocality base table, in which steps 2-10 are derived by adding the standard Within-Grade Amount for each grade. GS locality pay tables do not have standard Within-Grade Amounts. Your biweekly pay is based on your GS locality pay table. You can perform this same calculation for whichever locality area you work in if you know your area’s locality pay percentage (see Schedule 9 of the President’s Executive Order) and you have access to the GS 2018 non-locality base pay table. Note that by law GS locality pay rates are limited to the rate for Level IV of the Executive Schedule ($164,200 in 2018) so certain steps of the grade 15 pay scale may be capped at this amount.
How the Total Increases to the General Schedule Locality Pay Tables are Calculated
The first two sections described the process that occurs each January for updating the General Schedule (GS) non-locality pay table and the various GS locality pay tables. This section focuses on a question the Office of Human Resources often receives: “If the across-the-board general increase was 1.4 percent, and the DC area locality percentage was increased by 1.12 percent (DC locality was 27.10 percent in 2017 and 28.22 percent in 2018), why does the 2018 DC area GS locality pay table state "Total Increase: 2.29%"? Shouldn’t the total increase be the sum of the 1.4 percent across-the-board increase and the 1.12 percent increase to the locality pay percentage, and therefore be 2.52 percent?” The short answer is no, the total increase to DC locality pay is 2.29 percent. The answer lies in the fact that the across-the-board increase percentage is not the same as the increase to the locality pay percentage.
For those of you who are willing to persevere, grab a calculator and follow along with these calculations.
- Calculating the correct total percentage increase for the DC locality pay area requires taking into consideration that DC locality pay area 2017 base is 1.2710, not 1, since the 2017 DC area locality percentage was 27.10 percent.
- Since the base is already greater than 1, adding 1.12 percentage points to the DC locality pay percentage (to get 1.2822) will result in a locality pay increase lower than 2.52 percent.
- The calculation is 1.2822 (2018 DC locality pay) multiplied by 1.014 (2018 across-the-board increase), divided by 1.2710 (2017 DC locality pay). This equals a rounded total increase of 2.29 percent to the 2018 DC area GS locality pay.
Intuitive? Unfortunately, not. The Office of Personnel Management assisted us by providing this formula to calculate the total increase in 2018 GS locality pay. The same calculations can be performed to determine the individual total increases to any of the 2018 GS locality pay tables.