As of now, there is no law enacting the 2023 Federal Pay Raise Update. The Senate did not submit any counter-proposals to the White House recommendation, so we will have to wait until the end of September before the official number is announced. Meanwhile, some federal employees are asking themselves how inflation will affect their retirement plan. While inflation is a major risk to retirement plans, there are ways to prepare for it.
4.6 percent
While the 4.6 percent federal pay raise update for 2022 is a significant increase, the plan does not go far enough. In fact, some lawmakers are calling for a pay raise of 5.1 percent, a figure that would be more in line with recent increases in private sector pay. The NTEU and its members have urged the administration to match the 5.1% average FAIR Act increase before the end of the calendar year.
In the past, the government has faced increasing challenges recruiting and retaining employees. This has resulted in lower pay raises, which have left the Federal workforce with a pay gap with the private sector. While the 4.6 percent of 2023 Federal Pay Raise may seem small at first, it's still a big jump for the average federal employee. While it's a large number, this new increase will help many employees improve their financial conditions and ease debt burdens.
While there's no set date for when the pay increase will become effective, it's expected to happen soon. It's likely to be included in a larger budget, which will cover the fiscal year beginning Oct. 1. The Office of Management and Budget declined to comment on the matter, but senior administration officials said the pay raise update will be announced early next month.
5.1%
A 4.6 percent federal pay increase is a proposal that the White House has put forth, and the NTEU is encouraging Congress to expand upon the proposal and pass the law. The pay raise is needed to attract and retain highly skilled workers. Inflation has increased costs of everything from food to energy, and the cost of childcare and housing is increasing, making it necessary to address those expenses. Historically, a combination of good benefits, competitive pay, and flexible hours has helped keep federal employees.
The raise would be the largest federal employee pay raise in 20 years. The Biden administration has endorsed the proposal, but Congress has the power to change the number. The increase will go into effect automatically, so it's unclear if the Democratic-controlled Congress will change the numbers.
The House spending bills don't specifically mention the proposed pay raise. However, the Senate's spending bills explicitly endorse the plan. While this is an impressive increase, it still falls short of the 5.1% FAIR Act counterproposal.
5.8%
The Senate has passed a spending bill that does not include a federal pay raise update. Instead, it contains a 4.6% increase in the budget for fiscal year 2023. While this increase is larger than the Obama administration's proposal, it is still less than the 5.8% proposed by the administration.
In addition to the average raise, federal employees in some areas will see bigger raises. For example, the Seattle-Tacoma, Washington metropolitan area will receive 3.21% in 2022. In contrast, the rest of the U.S. will only see a 2.42% raise.
The pay raise announcement comes just months after Vice President Joe Biden's pay raise plan was first announced. In a letter to Congress, Biden stated his intention to propose an increase of 4.6% for civilian federal employees. The rate would be consistent with estimates in the 2023 federal budget. Once the president issues an executive order, the raise will become official and take effect on Jan. 1. The president's decision to choose an alternative pay plan allows the federal government to remain competitive in the labor market.
Presidents are required to make an annual adjustment in federal employee salaries. However, there are certain circumstances that may prevent a president from doing so. In some cases, a president may declare a national economic emergency to circumvent the automatic rate. This is known as an "alternative pay plan." This law also allows a president to propose a different rate.
5.9%
The Senate's spending bill for fiscal year 2023 does not include a federal pay raise. The bill also does not mention civilian federal workers' compensation. But federal employee groups and some members of Congress have urged appropriators to implement a larger increase. As it stands, federal employees would receive a 4.1% basic pay raise and a 1% locality pay increase.
Social Security beneficiaries will see a 5.9% increase in 2022. The increase will affect both the Social Security benefit and Supplemental Security Income benefit. This increase will also increase the maximum amount of earnings that will be subject to the Social Security tax. This change is important to Social Security beneficiaries, as it will determine the COLA increase later this year.
President Biden's alternative pay plan for 2023 includes a 4.1% across-the-board increase and 0.5% locality raises. The plan has two parts: a "locality" component that differs by city, and a "catchall rate" that applies to other areas. The Washington-Baltimore metropolitan area received a 3.02 percent raise, while other regions saw a 2.42 to 3.21 percent increase.
