OPM finalizes 6 new locality pay areas in time for 2019

The Office of Personnel Management will officially finalize six new locality pay areas in time for the first pay period in January 2019.

A final rule, which OPM is scheduled to publish Friday, will establish Birmingham, Alabama; Burlington, Vermont; Corpus Christi, Texas; Omaha, Nebraska; San Antonio, Texas; and Virginia Beach/Norfolk, Virginia, as new locality pay areas for the next year.

The addition of Corpus Christi and Omaha to the locality pay area list was a bit of an uncertainty, as OPM proposed regulations back in July to establish just four new areas. OPM officials said at the latest Federal Salary Council meeting in November that the president’s pay agent, a body comprised of the OPM director, Office of Management and Budget director and Labor secretary, may have time to add the other two to one rulemaking process.

Adding these six new locality pay areas will impact roughly 71,700 General Schedule employees. The final rule will have the biggest impact for Virginia Beach/Norfolk, where 30,400 employees will be affected, OPM said.

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Some employees, especially those in Burlington and Norfolk, have been waiting years for OPM to make locality pay in their areas official.

Regulations go into effect Jan. 5, 2019 and will be applicable to employees’ first paychecks of the new year. The President, however, must physically set locality pay rates at a later time and must adjust new areas year to year.

At this point of course, the prospect of federal pay in general is still unclear. President Donald Trump has proposed a freeze in across-the-board pay and locality pay adjustments for 2019. Congress is still debating whether it override the President’s suggestion and implement a 1.9 percent pay raise for civilian employees next year.

Federal employees in these six new areas will reap the benefits of their own, separate locality pay designation in the future, but if there’s no pay raise next year, there’s nothing to adjust under new locality pay rates.

House Republicans announced in October they had reached a deal to secure a raise for civilian employees, but the agreement isn’t public yet.

OPM received 184 comments on its July proposed rule to establish the four new locality pay areas. Many comments, according to the agency’s final rule, expressed frustration with the current guidelines the Federal Salary Council and president’s pay agent must use to consider when making additions to the locality pay list.

Some members on the salary council itself have said the current methodology didn’t reflect recruitment and retention challenges that some agencies across the country are facing and argue the existing formula should change.

The salary council is expected to send a series of five options to the president’s pay agent. These options convey recommendations that the agent could consider when comparing federal pay to the private sector — and then use that comparison as a foundation for subsequent locality pay adjustments.

Though OPM didn’t explicitly say change is coming to the locality pay system, it did suggest there may be a limit to the number of separate locality areas that government could establish. Future locality pay decisions may increase the number of affected employees and could impact other employment markets, OPM said.

“Establishing new locality pay areas could have the long-term effect of increasing pay for federal employees in affected locations if the President establishes higher locality pay percentages for those new pay areas,” OPM wrote. “In addition, studies do suggest that increasing wages can raise the wages of other workers when employers need to compete for personnel. However, when locality pay percentages are adjusted, the practice has been to allocate a percent of the total GS payroll for locality pay raises and to have the overall cost for such pay raises be the same, regardless of the number of locality pay areas.

Friday’s rulemaking brings the total number of locality pay areas separate from the “rest of U.S.” to 52.