How will locality pay rates change in 2026 and which metro areas see the largest adjustments?
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Executive summary
Locality pay for 2026 will be shaped by two competing inputs: technical recommendations from the Federal Salary Council/OPM based on BLS compensation surveys and the Pay Agent’s political decision to freeze locality percentages while applying a modest base increase; the working result is that most locality percentages remain at 2025 levels even as some geographic delineations and special-rate rules change [1] [2] [3]. High-cost metropolitan areas — historically San Jose–San Francisco–Oakland, New York, Los Angeles and the Washington, D.C. area — remain the localities with the largest pay adjustments in dollar and percentage terms under OPM’s framework, although the Pay Agent’s freeze limits across-the-board increases for 2026 [4] [5] [1].
1. How locality pay is calculated and what the FSC recommended
Locality pay is a percentage add-on to GS base pay calculated by comparing federal wages to non‑federal pay in the same labor markets using the BLS Annual National Compensation Survey; OPM and the Federal Salary Council produce recommended comparability payments and locality delineations based on that data [3] [1] [6]. The Federal Salary Council’s working documents describe a methodology tied to the Employment Cost Index and BLS survey comparisons and show proposed comparability payments for 2026 that would supplement any base GS increase [1] [7]. The Council’s math implied a larger GS base increase if fully applied under statutory formula — the ECI rose 3.8% for the covered period, which the Council translated into a 3.3% base GS increase in its analysis (ECI less half a percentage point) [1] [7].
2. The Pay Agent’s policy choice: freeze locality, small base raise
Despite those technical recommendations, the President’s Alternative Pay Plan announced a 1% base pay increase for January 2026 and expressly froze locality pay percentages at their 2025 levels for General Schedule employees and many other pay systems, meaning locality percentages themselves do not rise across the board even if OPM’s recommended comparisons showed upward pressure [2] [3]. OPM materials and advocacy outlets note that while locality percentages are frozen, some employees can still experience changes if they are reclassified into a different locality area because of boundary adjustments — those shifts reassign employees to a different set of locality percentages even in a freeze year [3] [8].
3. Which metro areas would have seen the largest adjustments (and why those areas matter)
OPM and industry trackers consistently show the largest locality differentials and the biggest historical dollar gains in high‑cost coastal metros: the San Jose–San Francisco–Oakland locality has produced the largest seven‑year dollar gains for a sample GS12/Step 5 position, with New York, Los Angeles and Washington, D.C. also among the highest‑paying locality areas [4] [5]. Those metros carry higher locality percentages because BLS survey data shows private‑sector pay in those labor markets is much higher than the GS base, producing larger comparability payments under OPM’s methodology [1] [5]. The Federal Salary Council’s 2026 attachments (not reproduced here) list proposed comparability payments by locality, but independent reporting and locality maps confirm the same set of metros lead the list [7] [4].
4. Edge cases: boundary changes and special rates that still move in 2026
Even with a freeze, boundary and wage‑area rule changes can reassign counties into different locality or FWS wage areas — for example, OPM finalized rules that move Union County, PA into the Harrisburg‑York‑Lebanon wage area effective for FY2026 surveys, a change that can alter pay for affected employees [8]. Separately, OPM continues to set “special rates” for hard‑to‑staff occupations (notably certain law‑enforcement roles), and those special rates are being handled separately with anticipated tables for early 2026 implementation — meaning some employees can see targeted increases despite the locality freeze [2].
5. Bottom line and practical effect for federal employees
Technically, OPM’s analytic process and the Federal Salary Council pointed to upward pressure on locality comparability in 2026 and a larger GS base under statutory ECI mechanics, yet the Pay Agent’s decision produces a 1% across‑the‑board base increase and holds locality percentages at 2025 levels, so most locality multipliers will not increase in 2026; affected incumbents may still gain or lose money if boundary changes or special‑rate actions move them into a different locality category [1] [2] [8]. Historical and OPM data make clear the largest locality differentials remain concentrated in Bay Area, New York, Los Angeles and Washington metro areas, which are the places where employees would have seen the biggest increases if locality percentages had surged in line with comparability findings [4] [5].