The President's Pay Agent

Washington, DC

December 13, 2005

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 we would recommend for January 2007 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 2007. You do not need to make a decision on the 2007 rates at this time.

Our plans for locality pay area boundaries in 2007 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 support the Council's recommendation to complete the phase-in of salary survey data collected under the National Compensation Survey program and use that data exclusively to set locality pay.

We continue to believe in the need for fundamental reforms of the white-collar Federal pay system. 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. We believe it is imperative to consider alternative approaches to the compensation of Federal employees that will lead to a Government that is citizen-centered, results-oriented, and market-based. We are encouraged by the discussion resulting from the Administration's draft legislative proposal, the Working for America Act, and we look forward to 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: