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Fiscal Year 2016 Prevailing Rate Pay Adjustments

Friday, December 18, 2015
CPM 2015-16
From: 
BETH F. COBERT, ACTING DIRECTOR

Division E of the Consolidated Appropriations Act, 2016, contains provisions affecting the determination of pay adjustments for certain prevailing rate (wage) employees in fiscal year 2016.  Section 737(a) provides that pay increases for certain prevailing rate employees in FY 2016 may not exceed 1.37 percent—the sum of the January 2016 General Schedule (GS) across-the-board percentage adjustment and the difference between the overall average percentage locality payments for GS employees in FY 2015 and FY 2016.  Section 737(b) provides that, notwithstanding section 737(a), pay adjustments for certain prevailing rate employees in FY 2016 may not be less than the January 2016 pay adjustments received by GS employees where they work.  Section 737(a) applies to wage employees covered by 5 U.S.C. 5342(a)(2) or 5348.  Section 737(b) applies to wage employees covered by 5 U.S.C. 5344 or 5348.  Sections 737(a) and 737(b) do not apply to wage employees who negotiate their pay under section 9(b) of Public Law 92-392. 

Lead agencies must establish wage rates for affected prevailing rate employees for FY 2016 by determining the maximum rates applicable under the pay limitation provisions of section 737(a), determining the minimum pay increase applicable under section 737(b), and then applying the higher of the rates to affected prevailing rate wage schedules.  In some wage areas, wage schedule adjustments under the minimum increase provisions of section 737(b) will be higher than under the maximum increase provisions of section 737(a).  In addition, as a result of section 737(b), certain prevailing rate wage areas will have more than one wage schedule in effect during FY 2016.

 

In addition to regular appropriated and nonappropriated fund wage schedules, prevailing rate pay systems have numerous special pay practices that are affected by sections 737(a) and 737(b).  Pay adjustments for employees who are paid special rates or are paid from special wage schedules are explained in detail in an attachment to this memorandum.

 

Determining Rates Under Section 737(a)

 

Section 737(a) provides that pay increases for wage employees in FY 2016 may not exceed 1.37 percent—the sum of the GS across-the-board percentage adjustment and the difference between the overall average percentage locality payments for GS employees in FY 2015 and FY 2016.

 

If any rate exceeds the rate payable on September 30, 2015, by more than 1.37 percent, or if any rate exceeds the rate payable on September 30, 2015, by more than 1.37 percent due to rounding, that rate must be reduced to the highest rate that does not exceed 1.37 percent.  If the annual wage survey of private sector rates in a given wage area indicates an adjustment of less than 1.37 percent is warranted under section 737(a), the lower prevailing rate will be payable under that section.

 

Wage schedules issued pursuant to a wage survey under the authority of 5 U.S.C. 5343 are subject to the limitation in section 737(a).  The limitation also applies to wage schedules produced by reference to schedules adjusted pursuant to wage surveys and to wage schedules that have been temporarily set aside from certain provisions of the Federal Wage System (FWS) pending study by the Federal Prevailing Rate Advisory Committee.  The adjustment of a wage rate required pursuant to a change in an applicable Federal, State, or local minimum wage rate is not subject to the limitation in section 737(a).  Rates established as the result of an adjustment in an applicable minimum wage rate will be the basis for determining the limitation on subsequent adjustments indicated by an annual prevailing rate wage survey.

 

Determining Rates Under Section 737(b)

 

Section 737(b) provides that adjustments in basic pay that take place in FY 2016 under 5 U.S.C. 5344 and 5348 may not be less than the percentage adjustments under 5 U.S.C. 5303 and 5304 received by GS employees in the same location in January 2016.

 

The geographic boundaries of appropriated and nonappropriated fund prevailing rate wage areas and of GS locality pay areas are not the same.  Consequently, section 737(b) requires that certain prevailing rate wage areas have more than one wage schedule in effect during FY 2016.  Although a majority of prevailing rate wage areas coincide only with part of the Rest of U.S. (RUS) GS locality pay area, many prevailing rate wage areas coincide with parts of more than one GS locality pay area.

 

In each situation where a prevailing rate wage area’s boundary coincides with a single GS locality pay area boundary, the lead agency for that wage area must establish one wage schedule applicable in the wage area.  For example, the Cascade, MT, nonappropriated fund FWS wage area coincides with part of the RUS GS locality pay area.  In this example, the minimum prevailing rate adjustment for the Cascade wage area is the same as the RUS GS locality pay area adjustment, 1.17 percent.

 

In each situation where a prevailing rate wage area coincides with part of more than one GS locality pay area, the lead agency for that wage area must establish more than one prevailing rate wage schedule for that wage area.  For example, the boundaries of the Philadelphia, PA, appropriated fund FWS wage area coincide with parts of two different GS locality pay areas—New York-Newark, NY-NJ-CT-PA and Philadelphia-Reading-Camden, PA-NJ-DE-MD.  In this example, the lead agency for the Philadelphia wage area must establish two separate wage schedules for use during FY 2016 in the Philadelphia FWS wage area.  In the part of the Philadelphia wage area that coincides with the New York-Newark, NY-NJ-CT GS locality pay area, the minimum prevailing rate adjustment is 1.38 percent and in the part coinciding with the Philadelphia-Reading-Camden, PA-NJ-DE-MD GS locality pay area, the minimum prevailing rate adjustment is 1.36 percent.

 

By regulation, the President’s Pay Agent established 13 new GS locality pay areas that will become applicable in January 2016.  Under section 737(b), FWS employees stationed in locations coinciding with these new GS locality pay areas are entitled to annual adjustments equal to the annual adjustments received by GS employees stationed in these new locality pay areas whose annual pay adjustments in January are based on 5 U.S.C. 5303 and 5304.  For example, FWS employees stationed in Saratoga County, NY, in the Albany-Schenectady, NY GS locality pay area are entitled to an annual adjustment at least equal to the annual adjustment that applies to GS employees in that locality pay area.  That annual adjustment applicable in January 2016 is 1.29 percent.  As this amount is lower than the 1.37 percent pay limitation amount under section 737(a), FWS employees in Saratoga County may receive annual adjustments somewhere between the 1.29 percent floor adjustment amount under section 737(b) and the 1.37 percent pay limitation amount under section 737(a).

 

In addition to the creation of new locality pay areas, the GS locality pay areas regulation also redefines certain counties from the RUS GS locality pay area to individually defined locality pay areas.  FWS employees stationed in such counties are entitled to annual adjustments equal to the adjustments received by GS employees whose pay adjustments are based on 5 U.S.C. 5303 and 5304.  For example, Bryan County, OK, is being redefined from the RUS GS locality pay area to the Dallas-Fort Worth, TX-OK GS locality pay area in January 2016.  FWS employees stationed in Bryan County are entitled to an annual adjustment at least equal to the annual adjustment that applies to GS employees in the Dallas-Fort Worth locality pay area.  That amount for Bryan County is 1.31 percent.  However, because Bryan County is being defined to the Dallas-Fort Worth locality pay area, FWS employees should be moved from the Oklahoma City, OK (RUS) wage schedule to the Oklahoma City, OK (DFW) wage schedule on the normal effective date applicable in the Oklahoma City wage area in FY 2016.  FWS employees in Bryan County would be entitled to the rates of pay in the higher Oklahoma City (DFW) wage schedule.

 

Prevailing rate employees in overseas locations described in 5 U.S.C. 5343(a)(5) also must receive increases at least equal to the increases received by GS employees in the RUS GS locality pay area.

 

Prevailing rate adjustments under section 737(b) must be rounded upwards when necessary so that such adjustments are not less than the relevant GS percentage adjustments that occur in January 2016.

 

Effective Date of Retroactive Pay Adjustments

 

The wage rates on certain FY 2016 wage schedules are effective retroactively to the normal effective date prescribed on the wage schedule by the lead agency.  This uniform date is fixed for all agencies using a wage schedule.  For example, the wage schedule for the Washington, DC, FWS wage area has a normal effective date in FY 2016 of October 16, 2015.  Employees paid from this wage schedule are entitled to pay adjustments retroactive to October 16, 2015.  For wage areas with normal effective dates later in the fiscal year, retroactive adjustments will not be required.  For example, wage schedules for the Savannah, GA, FWS wage area will have a normal effective date in FY 2016 of July 24, 2016.  Employees stationed in this wage area will be entitled to annual adjustments prospectively in July 24, 2016.

 

Obtaining Wage Schedules

 

Prevailing rate wage schedules will continue to be distributed by lead agencies through normal agency distribution channels.  In addition, Federal Wage System wage schedules are available from the Wage and Salary Division of the Department of Defense’s Defense Civilian Personnel Advisory Service (http://www.cpms.osd.mil/Subpage/Wage).

 

For further information, please contact OPM’s Pay Systems, Pay and Leave, at (202) 606-2858 or by email at pay-leave-policy@opm.gov.

 

cc:  Chief Human Capital Officers, and Human Resources Directors 

Attachment (See PDF below)