Federal Employee Locality Pay: What It Is and How It Works

Locality pay is a supplemental compensation component added to base General Schedule salaries to account for wage differences across geographic labor markets in the United States. Without it, federal agencies in high-cost metropolitan areas would consistently lose recruitment competitions against private-sector and state-government employers paying regional market rates. This page covers the definition and statutory basis of locality pay, the mechanics of how it is calculated and applied, common scenarios employees encounter, and the boundary conditions that determine eligibility.

Definition and scope

Locality pay is a geographic wage adjustment authorized under the Federal Employees Pay Comparability Act of 1990 (FEPCA), codified at 5 U.S.C. § 5304. The statute directs the federal government to close a measurable pay gap between General Schedule (GS) salaries and non-federal pay in comparable occupations across defined metropolitan and regional areas.

The U.S. Office of Personnel Management (OPM) administers locality pay through an annual table of locality pay areas, each assigned a percentage rate. For 2024, OPM established 54 defined locality pay areas, with rates ranging from a floor of 16.82 percent for the "Rest of U.S." catch-all area to a ceiling of 44.15 percent for the San Francisco–Oakland–Hayward locality (OPM 2024 Locality Pay Tables). Washington–Baltimore–Arlington stood at 33.26 percent in that same cycle.

Locality pay applies only to GS employees and certain other white-collar pay systems explicitly covered by OPM guidance. Wage Grade (WG) employees paid under the Federal Wage System, Senior Executive Service (SES) members, and employees covered by alternative pay systems — such as those at the Transportation Security Administration or in certain scientific positions — are governed by separate compensation frameworks. For a broader orientation to how pay systems fit together, see the federal employee pay scales overview on this site's main reference index.

How it works

Locality pay is added on top of a GS employee's base pay after the grade-and-step rate is established. The calculation follows a defined sequence:

  1. Determine the base GS rate. The employee's grade (GS-1 through GS-15) and step (1 through 10) produce a base annual salary from the nationwide GS base pay table.
  2. Identify the applicable locality area. The duty station — not the employee's home address — determines which locality area applies. OPM assigns every U.S. county and territory to one of the 54 defined areas.
  3. Apply the locality percentage. The locality rate is multiplied against the base GS rate and the result is added to that base. A GS-12, Step 5 employee with a base rate of $82,764 in the Washington–Baltimore–Arlington area (33.26 percent) would receive a locality adjustment of approximately $27,527, producing a total annual rate of approximately $110,291.
  4. Cap against Executive Schedule Level IV. Total GS pay — base plus locality — cannot exceed the pay rate for Executive Schedule Level IV (5 U.S.C. § 5304(g)), which OPM sets each year.
  5. Reflect in biweekly paychecks. Locality pay appears as a separate line item in the employee's earnings statement, distinct from base pay, and is subject to the same tax withholding and retirement contribution calculations.

The President's Pay Agent — a body composed of the Secretary of Labor, the Director of OPM, and the Director of the Office of Management and Budget — reviews Federal Salary Council recommendations annually and recommends locality rates to the President, who issues the final pay order through an executive order (OPM, Pay Agent and Federal Salary Council).

Common scenarios

Permanent change of station (PCS). When an employee moves from one duty station to another, the locality rate changes to match the new location, effective the first day at the new duty station. An employee transferring from a "Rest of U.S." post (16.82 percent) to San Jose, California (which falls within the San Francisco locality at 44.15 percent) sees an immediate upward adjustment in total pay without any change to grade or step.

Remote work and telework. Under OPM guidance, locality pay tracks the official duty station on record — not the location where telework is performed. An employee whose agency designates their home as the official duty station will be paid under the locality area encompassing that home address. Agencies may designate a remote worker's home as the official duty station, which can increase or decrease locality pay relative to the original office location. The federal employee telework policy page covers how duty station determinations interact with work location arrangements.

Detail assignments. Employees on a temporary detail to a different geographic location generally retain the locality rate tied to their permanent duty station, not the detail location, unless the detail is expected to last 365 days or more, at which point duty station reclassification rules may apply.

Promotions near the pay cap. A GS-15 employee in a high-locality area may find that a within-grade increase or promotion would mathematically push total pay above the Executive Schedule Level IV cap. In that case, total pay is capped at the statutory ceiling. The federal employee within-grade increases page addresses how this interacts with step progression.

Decision boundaries

Several boundary conditions determine whether, and at what rate, locality pay applies:

GS versus non-GS pay systems. Locality pay under 5 U.S.C. § 5304 applies to the General Schedule. Employees in the Federal Wage System, SES, or agency-specific pay bands fall outside its direct scope. The federal employee classification system page details how these systems are structured and which occupational series fall under each.

Overseas and non-foreign area duty stations. Employees stationed in non-foreign areas — Alaska, Hawaii, Guam, Puerto Rico, and similar territories — receive separate cost-of-living adjustments (COLAs) under 5 U.S.C. § 5941 rather than locality pay. These two adjustment types are mutually exclusive: a single employee cannot receive both locality pay and a non-foreign COLA simultaneously. Employees assigned overseas under Chief of Mission authority or Status of Forces agreements are typically excluded from the domestic locality framework entirely.

Retained pay versus locality adjustments. Employees receiving retained pay under reduction-in-force or reclassification rules retain their higher basic pay rate but may not see the same interaction with locality adjustments as standard GS employees. The federal employee reduction in force page covers the retained pay mechanics that create this distinction.

Proposed locality area changes. The Federal Salary Council periodically recommends the creation of new defined locality areas — separating specific metropolitan statistical areas from the "Rest of U.S." category — to more precisely align federal pay with local labor markets. Proposed areas move through a review cycle before receiving final designation, meaning employees in a proposed area are still paid at the "Rest of U.S." rate until the change is formally enacted by presidential executive order.

Understanding how locality pay interacts with grade, step, pay caps, and duty station rules is foundational to reading a federal pay stub accurately and projecting compensation changes across a federal career. The general schedule pay grades page provides the underlying grade-and-step structure on which locality adjustments operate.

References

Read Next

Federal Employee Pay Scales: How Compensation Is Structured Code and administered by the Office of Personnel Management (OPM). Federal Employee Telework and Remote Work Policies government may perform their official duties outside a traditional federal facility. Within-Grade Increases (Step Increases) for Federal Employees § 5335 and implementing regulations at 5 C.F.R.