What Is It 

Locality-based comparability pay is designed to reduce the disparity between Federal and private sector pay to five percent in nine years. The amount of a locality-based comparability increase is based on survey data collected by the Bureau of Labor Statistics which surveys what non-Federal employers pay their employees in various metropolitan areas across the country. These metropolitan areas comprise the largest populations of General Schedule (GS) employees or, in some instances where GS populations are sparse, they represent several areas which have been consolidated for statistical purposes. Presently, there are 28 locality pay areas in the contiguous United States. An employee who is not included in one of the large metropolitan or consolidated metropolitan areas receives the locality-based increase which is authorized for a pay area called "Rest of the United States." 

It is the responsibility of the President's Salary Council, six of whose nine members are union representatives, to continually refine the criteria by which the pay comparability system operates. 

The President's Pay Agent, a three-person panel comprising the Directors of the Office of Management and Budget and the Office of Personnel Management, and the Secretary of Labor, recommends to the President the boundaries of the pay areas and the amount of the locality-based comparability increase for each area. The President makes the final decision on the rates payable. 

Locality pay adjustments must be made when non-Federal pay exceeds Federal pay by more than 5 percent. Locality pay does not apply outside the continental United States. 

Comparison to the General Increase 

Locality pay under 5 U.S.C. 5304 is not to be confused with the general pay increase under 5 U.S.C. 5303. Locality rates or increases will vary among pay areas. When the general increase is effected, the first step of every grade of the General Schedule and all statutory pay systems is increased by the same factor. 

The general increase is based on change in the Employment Cost Index (ECI). The ECI is a measure of the amount of increase in private sector wages and salaries. The general increase cannot be reduced unless the country is in a severe economic crisis. Severe economic crisis is generally interpreted to be several consecutive quarters of negative economic growth. (Because the general increase has to be included in the President's budget proposal, the increase that employees see is always the increase which trails the current ECI by two years.) 

Who Gets Locality Pay 

General Schedule employees, Senior Executive, Senior Foreign Service, Foreign Service and Senior-level personnel, Administrative Law Judges, Examiners-in-Chief on the Board of Patent Appeals, and Attorney-Examiners (Trademark) on the Trademark Trial and Appeals Board began receiving locality-based comparability pay in January of 1994. 

Locality Pay Not Portable 

A locality-based comparability rate is not portable. An employee's locality-based comparability rate is determined by the area in which he or she has a duty station of record. A detail, since it does not change an employee's official duty station, will not affect locality pay. 

Pay Administration 

An employee is entitled to basic pay augmented by locality-based comparability pay in lieu of any other rate to which he or she may be eligible if it provides the greatest benefit. 

A locality-based comparability rate is basic pay for purposes of retirement, life insurance, FICA, and thrift savings deductions; also premium pay and the biweekly premium pay limitation, severance pay, advances in pay, worker's compensation payments, and lump sum leave entitlements. 

A locality-based comparability rate is not base pay for purposes of highest previous rate, promotion, within-grade increases, pay retention, recruitment or relocation bonuses or retention allowances, supervisory differentials, or any payment or benefit calculated as a percentage of basic pay. 

The employee's regular rate or special rate must be used for these purposes. See the charts attached for quick reference. 

A locality-based comparability increase is not an equivalent increase and not a general increase. 

References 

5 U.S.C. 5303 (General Increase)
Title I, Federal Employees Pay Comparability Act, Public Law 101-509 (Pay Comparability System)
5 U.S.C. 5304; Subpart F, Part 531, 5 CFR (Locality Pay)