U.S. Office of Personnel Management - Ensuring the Federal Government has an effective civilian workforce

Washington, DC

December 20, 2006

MEMORANDUM FOR THE PRESIDENT

SUBJECT: Annual Report on General Schedule Locality-Based Comparability Payments

The law requires the President's Pay Agent to submit a report each year showing the locality-based comparability payments we would recommend for General Schedule employees in the following fiscal year if the adjustments were to be made in accordance with section 5304 of title 5, United States Code. In keeping with this statutory requirement, this report shows the adjustments that would be dictated for January 2008 if the methodology and rates required by current law were to be implemented. Given the current national emergency, however, we believe it would be unwise to allow the locality pay increases shown in this report to take effect in January 2008. You do not need to make a decision on the 2008 rates at this time.

Our plans for locality pay area boundaries in 2008 and our decisions on the methodology for comparing Federal and non-Federal rates of pay also are contained in this report. The development of these recommendations has been greatly facilitated by the thoughtful work of the Federal Salary Council.

We continue to believe in the need for fundamental reforms of the white-collar Federal pay system. As we have previously reported, the Pay Agent has serious concerns about the utility of a process that requires a single percentage adjustment in the pay of all white-collar civilian Federal employees in each locality pay area without regard to the differing labor markets for major occupational groups or the performance of individual employees.

Finally, we also continue to believe it is imperative to develop performance-sensitive compensation systems that will lead to a Government that is citizen-centered, results-oriented, and market-based. We prefer a new system that will empower Federal agencies to better manage, develop, and reward employees to better serve the American people.

The President's Pay Agent: