How do locality pay adjustments affect federal employee salaries in 2026?
Executive summary
The 2026 federal pay plan as transmitted to Congress sets a 1.0% across‑the‑board GS base pay increase while freezing locality pay increases at zero for 2026; under the statutory formula locality pay would otherwise have risen an average of about 18.88% [1] [2]. Certain federal law‑enforcement categories are singled out for a larger 3.8% adjustment in pay [1] [3].
1. What the administration actually proposed — a targeted freeze
The White House’s alternative pay plan for 2026 increases base General Schedule pay by 1.0% and instructs that locality pay increases be set at zero for the year — meaning locality percentage rates would remain at 2025 levels instead of rising [1] [4]. The administration framed the freeze as fiscally responsible given what it characterized as an unsustainably large automatic locality surge under the statutory formula [2].
2. Why locality matters: geography, not job class
Locality pay is a geographic percentage added to GS base pay to reflect non‑federal market pay differences across 46 locality areas (including large metros, Alaska and Hawaii, with the Rest of U.S. as a catch‑all) and it can materially change total pay for employees in high‑cost areas [5]. Freezing locality rates leaves the geographic differentials intact but prevents them from increasing, so workers in high‑locality areas forgo what would have been a larger boost to total compensation [5] [6].
3. The “what would have happened” statutory baseline
Under the Federal Employees Pay Comparability Act (FEPCA) formula and recommendations from the Federal Salary Council, the baseline calculation for 2026 (before the alternative plan) would have produced much larger adjustments — the administration’s letter cites an average locality increase of 18.88% and a separate 3.3% across‑the‑board GS base raise under the formula [2] [7]. The administration used those statute‑driven numbers to justify invoking an alternative plan that limits increases to 1.0% base and freezes locality [2].
4. Winners and losers in the plan
Most GS employees receive only the 1.0% base increase; some federal law enforcement employees are designated to receive a total 3.8% increase, matching the military pay action referenced by the administration [1] [3]. Employees in high‑locality areas who rely heavily on locality pay see the greatest relative loss of potential pay growth because locality increases would have contributed a substantial share of the formulaic gains [2] [8].
5. How locality is calculated — the data engine behind the percentages
Locality percentages are derived from comparisons between GS base pay and non‑federal pay using Bureau of Labor Statistics and other survey data, as discussed by the Federal Salary Council and OPM; that process can yield sizable locality rates in areas where private sector pay has outpaced federal wages [7] [5]. The Federal Salary Council’s report points to Employment Cost Index movements as the driver of the large statutory adjustments that the alternative plan overrides [7].
6. Political and fiscal context — competing arguments
The administration framed the freeze as a necessary check on what it called an unaffordable statutory spike; critics and unions pushed for larger increases, and congressional proposals such as the FAIR Act sought a bigger combined raise (3.3% base + 1% locality = 4.3%) to restore comparability [2] [9]. Reporting and industry analyses note the long‑running tension between FEPCA’s formulaic remedy for pay disparities and repeated presidential alternative plans that scale back statutory increases [2] [8].
7. What employees should expect in paychecks and classifications
Practically, a frozen locality means paychecks for most GS employees rise only by the 1.0% base change; however, locality area definitions or reclassifications recommended by the Federal Salary Council could still change where an employee sits, producing gains for a subset even with a frozen locality percentage [10] [7]. Available sources do not mention detailed implementation dates beyond the adjustment taking effect the first pay period on or after January 1, 2026 [4].
8. Limits of current reporting and open questions
The documentation shows the administration’s determination and the Federal Salary Council’s recommendations, but available sources do not mention final OPM pay tables published later in the year or Congress’s eventual action to accept, modify, or override the alternative plan [1] [7]. Also not found in current reporting is a line‑by‑line estimate showing exactly how the freeze alters individual GS pay by locality grade and step; analysts have produced estimates but the official tables remain the authoritative source [11] [12].
9. Bottom line for federal workers and policymakers
Freezing locality pay neutralizes a large, formula‑driven correction to geographic pay disparities and reduces the next year’s overall increases for many workers to a modest 1.0% base raise, while lifting selected law‑enforcement pay by 3.8% [1] [3]. The move underscores the persistent policy choice between honoring formulaic comparability increases and exercising presidential fiscal restraint — a choice that produces winners and losers across different localities and occupations [2] [9].