	Introduction

Federal white-collar employees paid under the General Schedule (GS), Foreign Service Schedule, and certain Veterans Health Administration Schedules are intended by law to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509 , the Federal Employees Pay Comparability Act (FEPCA) of 1990. Although the annual adjustment and the locality payment are sometimes referred to as cost-of-living adjustments, neither is based on measures of the cost of living. FEPCA has never been implemented as originally enacted. FEPCA requires the annual pay adjustment for GS employees to be based on the Employment Cost Index (ECI), which measures change in private-sector wages and salaries. Locality-Based Comparability Payments10

GS employees are also intended to receive locality-based comparability payments. (In January 2009, there are 32 pay areas nationwide.) By law, the disparity between non-federal and federal salaries is to be reduced to 5%. By January 2002, and continuing each year thereafter, FEPCA specified that amounts payable could not be less than the full amounts necessary to reduce the pay disparity of the target gap to 5%. January 2010 Pay Adjustment

		The President's Recommendation

The President usually includes a proposal on the federal civilian pay adjustment in the Budget of the United States issued in February of each year. Consolidated Appropriations Act

Division C, Section 744(a) of P.L. 111-117 , the Consolidated Appropriations Act for FY2010 ( H.R. 3288 ), enacted on December 16, 2009, provides an average 2.0% pay adjustment for federal civilian employees, including DOD and DHS employees at Section 744(a). On December 23, 2009, the President issued Executive Order 13525, which implemented the law and the allocation of the pay increase as a 1.5% annual basic pay adjustment and a 0.5% locality pay adjustment.
Federal white-collar employees are intended by law to receive an annual pay adjustment and a locality-based comparability payment, effective in January of each year, under Section 529 of P.L. 101-509, the Federal Employees Pay Comparability Act (FEPCA) of 1990. The law has never been implemented as originally enacted; annual and locality payments pursuant to the statute have been reduced each year. Federal white-collar employees received a 1.5% annual pay adjustment and a 0.5% locality-based comparability payment in January 2010. President Barack H. Obama authorized the average 2.0% pay adjustment in Executive Order 13525, issued on December 23, 2009. Although the annual adjustment and the locality payment are sometimes referred to as cost-of-living adjustments, neither is based on changes in the cost of living.
The annual pay adjustment is based on the Employment Cost Index (ECI), which measures changes in private-sector wages and salaries. The size of the locality payment is determined by the President and is based on a comparison of non-federal and General Schedule (GS) salaries in 32 pay areas nationwide. (The GS is the pay schedule that covers white-collar employees under the Civil Service.) By law, the disparity between non-federal and federal salaries was to be gradually reduced to 5% during the years 1994 to 2002. Continuing in each year thereafter, FEPCA requires that amounts payable may not be less than the full amounts necessary to reduce the pay disparity to 5%.
The President's FY2010 budget proposed a 2.0% federal civilian pay adjustment. Division C, Section 744(a) of P.L. 111-117, the Consolidated Appropriations Act for FY2010 (H.R. 3288), enacted on December 16, 2009, provides the 2.0% pay adjustment for federal civilian employees, including employees in the Departments of Defense and Homeland Security.
This report will be updated as events dictate.