Locality Pay

Implemented in January 1994, the Federal Employees Pay Comparability Act of 1990 (FEPCA) established locality pay for General Schedule (GS) employees. FEPCA provides for a two-part annual pay adjustment for General Schedule workers: an across-the-board pay adjustment and a locality pay adjustment that varies by pay locality. FEPCA also provides pay adjustments based on survey comparisons with non-Federal rates on a locality basis to narrow the pay gap between Federal and non-Federal salaries and to make Federal pay more responsive to local labor market conditions.

• Locality adjustments are paid within each area determined to have a Federal - non-Federal pay disparity greater than 5%. There currently are 35 locality pay areas, including Rest of U.S. area, Alaska, Hawaii, and other Nonforeign Areas Defined in 5 CFR Part 591. Employees entitled to a higher rate of basic pay than the locality rate for their area receive the higher rate (e.g., employees receiving a special salary rate higher than the locality rate of pay).
• Locality pay is considered in applying various pay-setting rules (including maximum payable rate, promotion, transfer, and pay retention) and in computing hiring and retention incentives, and rating-based awards expressed as a percentage of pay as well as retirement and benefits.