Lawmakers have once again put forward a version of a bill that would further increase annual raises paid to millions of federal employees.

Just a few weeks into the calendar year, Democrats are already looking to introduce an average 4% across-the-board increase coupled with a 3.4% locality pay adjustment for next calendar year. This latest version of the Federal Adjustment of Income Rates Act thus suggests a total 7.4% pay raise in 2025, more than this year’s enacted raise of 5.2% and significantly larger than recent years’.

“After years of pay freezes, our bill gives these dedicated public servants a much-deserved raise,” said Sen. Brian Schatz, D-Hawaii, who co-sponsored the bill with House Democrat Gerry Connolly, D-Va., in a statement.

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Previous drafts of this bill have been introduced in Congress several times, and while it has gained the support of dozens of House Democrats, it has yet to become law. House Republicans, meanwhile, presented their own version of reform to the federal pay system in June, but theirs included stopping automatic salary increases altogether.

Increasingly, federal employee unions have stood behind raising annual pay raises, saying that government shutdowns, pay freezes, hiring pauses and sequestration-related furloughs eroded paychecks over time, especially coupled with lingering high inflation. Moreover, many agencies are in a scramble for talent to accompany various governmentwide initiatives to develop AI capabilities first and fastest, contend with cybersecurity threats and modernize public services.

“Federal employees earn 27.5% less on average than they would doing the same jobs in the private sector – and that situation has been getting worse for years,” said Everett Kelley, president of the American Federation of Government Employees, which represents 750,000 civil service workers, in a statement.

Though Congress has put forward its own pay pitch, it has routinely been up to the White House to set the final number. But even without presidential action, federal employees are entitled to annual raises prescribed by law.

According to the legislation, base pay raises are tied to yearly increases in the Employment Cost Index. That’s not the same thing as a cost-of-living adjustment, though it can still fluctuate based on how much it costs to compensate employees across sectors.

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Why do federal pay raises lag the private sector?
The federal budget proposal unveiled by the White House in March included an average pay increase of 4.6% for civilian federal workers, matching a planned military pay raise. Historically, with pay lagging in the federal sector, other factors including steady opportunities, competitive benefits and hybrid work to retain talent.
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That standard set by Connolly and Schatz is in line with what would be called for by the Federal Employees Pay Comparability Act of 1990 and with what the Federal Salary Council determined in an initial report in November.

Rather, since 1995, it has been an established pattern of routine for the White House or Congress to circumvent what’s called for by FEPCA and declare its own rate. Joe Biden did just that in December via executive order.

As a result of these interferences, increases have been smaller than what the original law would stipulate.

“It is also worth noting that the overall remaining pay disparity including implemented locality payments has been greater than 20% since March 2007,” according to the council, a nine-seat body comprising three pay-policy experts and six representatives of federal government organizations, including unions.

The target gap between private-public sector pay is 5%.

While annual pay raises aren’t the only way federal agencies can incentive employees and job candidates monetarily, it’s one of the near-guarantees employees have, especially in the way the original law intended.

“Congress must understand that to attract and retain a skilled workforce that best serves the American people, we need to pay our civil servants competitive wages,” said Randy Erwin, president of the National Federation of Federal Employees, in a statement.

According to the latest results governmentwide employee survey administered by the Office of Personnel Management, pay satisfaction fell from 2020 to 2023.

In a recent move to improve overall pay parity, the Biden administration also took a step toward amending pay rules to prohibit consideration of an applicant’s pay history when determining their salary for federal employment.

It terms of next steps, it’ll be months before federal employees hear anything official on the 2025 pay increase. Typically the first official action is taken in the spring, when the President’s budget is published for the upcoming fiscal year. Last year that came out in March, though it’s due in early February.

Then, sometime in August, the White House tends to issue a letter formally declaring its intent to set an alternate pay rate, if it opts to do so. From there, unless Congress objects, the proposed rate takes effect at the start of a new fiscal year with the signing of an executive order.

For military service members, the civilian pay raise has mirrored the one given to service members in some years, but that hasn’t always been the case. The annual defense authorization bill sheds light on that figure for troops each year.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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