How do locality pay adjustments affect federal employees’ 2026 total pay?
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Executive summary
The Administration’s 2026 alternative pay plan sets a 1.0% across‑the‑board GS base pay increase while freezing locality pay increases at 2025 levels, meaning most federal employees will see only the 1.0% bump rather than any additional locality growth that might otherwise have applied [1] [2]. The White House contends freezing locality prevents an average locality jump of 18.88% that would have cost roughly $24 billion in year one under the statutory formula; Congressional or union proposals sought larger combined raises (e.g., 3.3% base + 1% locality or a 4.3% package) that would have produced larger total pay increases [2] [3].
1. What the 2026 plan actually does to pay
The President’s alternative pay plan directs a 1.0% increase to GS base pay effective the first pay period on or after Jan. 1, 2026, and explicitly sets locality pay increases at zero for 2026; certain law‑enforcement categories are treated separately and may receive a larger base increase (3.8%) but not additional locality increases beyond 2025 rates [1] [4] [5].
2. Why locality changes matter to total pay
Locality pay is a percentage add‑on to base GS pay tied to geographic pay disparities; many employees in high‑cost areas have a substantial portion of their total pay coming from locality percentages set by OPM recommendations and Pay Agent decisions. Freezing locality removes that component of automatic catch‑up that would otherwise raise total compensation in some localities, so the 1.0% base increase cannot be read as the whole story for employees who rely heavily on locality differentials [6] [7].
3. The headline “lost” raise: statutory formula versus the plan
Under the Federal Employees Pay Comparability Act (FEPCA) formula and the Federal Salary Council’s recommendation, base increases could have been larger (the council calculated 3.3% base from the ECI and recommended locality adjustments as well), and the statutory mechanics would have produced a much larger average locality gain—figures the White House said averaged 18.88%—so the alternative plan replaces that formulaic outcome with a far smaller, administratively chosen package [7] [2].
4. Who wins and who loses in dollars and percent
Most GS employees will receive a straightforward 1.0% base pay bump, so an employee paid $60,000 base would see $600 more in base pay before taxes; an employee whose largest pay increases come historically from locality will see no locality‑driven rise beyond 2025 levels, reducing their potential total‑pay growth for 2026 compared with the formulaic outcome [1] [2]. Designated federal law enforcement officers flagged in the plan will receive a 3.8% increase in base pay, which produces larger percentage growth for those categories even though their locality component is frozen [4] [5].
5. Political and fiscal rationales offered
The White House frames the freeze as fiscal responsibility: the alternative plan argues the formulaic locality spike would cost about $24 billion in year one and be unsustainable, so a targeted 1.0% base raise plus selective LEO increases better balances recruitment/retention goals and budget discipline [2]. Opposing viewpoints—from unions and some lawmakers—advocated statutory or legislative paths that would have produced larger combined raises (examples include bills and union advocacy for a 3.3% base + 1% locality or a 4.3% total average increase), reflecting a competing view that federal pay has lagged private sector wages and merits steeper increases [3] [8].
6. Practical implications for employees and payroll timing
The plan takes effect on the first pay period beginning on or after Jan. 1, 2026; final pay tables are typically published by OPM in December, and any locality area boundary changes or reclassifications recommended by the Federal Salary Council could still affect which locality label applies to an employee even if the overall locality rates are frozen [5] [9]. Employees should watch OPM releases for exact tables and verify any locality‑area reassignments that can alter individual outcomes [6] [9].
7. Limits of current reporting and uncertainties
Available sources uniformly report the 1.0% base increase and freeze of locality rates but do not detail every implementation nuance—such as how promotions, retained rates, special pay adjustments, or agency‑specific locality reallocations will be handled in payroll systems—so employees should consult agency HR and OPM final guidance when tables are published [1] [6]. Congress could still act to change pay through legislation, and union advocacy remains an ongoing counterweight to the Administration’s plan [3] [8].
Bottom line: the 2026 plan raises base pay modestly (1.0%) while blocking locality increases that, under the statutory formula, would have produced materially larger average locality growth; that tradeoff produces winners (selected LEOs) and losers (employees heavily dependent on locality differentials), and it reflects an explicit policy choice to limit near‑term federal pay growth [1] [2] [4].