0:00
Will federal employees get a pay raise
0:02
in 2026? Here's what we know and here's
0:06
what is missing. So, you may be
0:08
thinking, "It's only August. Why are we
0:10
talking about a pay raise for next year
0:13
already? It's way too early. I'm not
0:16
even thinking about 2026 yet." Well,
0:19
August is actually a significant month
0:21
for the pay raise process. And I'm going
0:24
to explain why in this video. The
0:27
expectation right now is that there will
0:30
not be a pay raise for federal employees
0:33
The reason I say that is because the
0:37
White House budget proposal that came
0:38
out a few months ago was silent on the
0:40
matter of a pay raise for federal
0:42
employees. However, it proposed a raise
0:45
for members of the military. So because
0:48
of that it's the presumption is that
0:52
there is not going to be a pay raise
0:54
proposed by President Trump for 2026. I
0:58
mentioned August is a significant month
1:00
as part of the pay raise process and the
1:02
reason is because of the alternative pay
1:04
plan letter that has to be issued in the
1:06
month of August. So what does this
1:08
letter do? It's part of FEPA the federal
1:12
employees pay comparability act process.
1:15
I'll get to that in a moment, but um the
1:19
alternative pay plan letter typically
1:23
details about the president's proposal
1:25
for a pay raise for the coming year. So
1:28
that would include things like locality
1:30
pay adjustments and uh what the actual
1:34
base pay raise will be. It normally will
1:36
break all of that down. Or if the
1:40
presumption of a pay freeze comes to
1:42
fruition there, it would spell out no
1:46
pay raise um that the president is
1:48
proposing a freeze for the coming year.
1:50
Last year, as an example, President
1:52
Biden in his alternative pay plan letter
1:56
proposed a 1.7% base pay raise for
1:59
federal employees for 2025 with 3% for
2:03
locality pay. So, a 2% overall average
2:08
Um, the alternative pay plan letter is
2:11
part of FEPKA. That is the federal
2:13
employees pay comparability act. It was
2:16
passed into law in 1990 and it
2:18
establishes an automatic formula for
2:21
federal employee pay raises. But the
2:24
president can override this formula and
2:26
usually does by issuing the alternative
2:29
pay plan letter. That's why this letter
2:31
is significant. It has to be issued in
2:33
August. That's the deadline for it. It
2:36
typically comes out late in August.
2:38
And the historical precedent in terms of
2:42
pay freezes is that a letter is still
2:44
typically issued even if there's no pay
2:46
raise being proposed.
2:49
Um during President Obama's term, there
2:52
were uh three years of no raises for
2:55
federal employees and the letter was
2:58
issued in two of those three years. Um
3:01
2012 was an exception because
3:05
um the pay freeze was formalized through
3:08
legislation that was passed by Congress
3:11
which overrode any automatic adjustments
3:13
under FECA and took away the need for
3:15
issuing the letter that year. But in the
3:17
other two years there was a letter
3:19
issued. Um as also President Trump
3:22
proposed a pay freeze in his first term.
3:24
in his alternative pay plan letter in
3:29
he spelled out a pay freeze for 2019.
3:33
And that was an interesting year, too,
3:35
because Congress got involved and in
3:37
February of 2019, they passed
3:40
legislation that included a 1.9% raise
3:44
for federal employees, and it was done
3:45
retroactively back to the start of the
3:47
year. So, that was very unusual. It's
3:50
also pretty unusual for Congress to get
3:52
involved in the process at all, but
3:54
that's an example showing that they can
4:00
Um, this year, Congress has proposed a
4:05
4.3% raise for federal employees or I
4:08
should say two law two lawmakers in
4:10
Congress did. They introduced the
4:13
federal adjustment of income rates or
4:15
fair act and that was issued by
4:18
Congressman Jerry Connelly shortly
4:20
before he passed away and um Senator
4:23
Brian Shatz and the the two of them have
4:26
issued this legislation every year going
4:29
back a number of years. It's not going
4:31
to happen but it is just an example of
4:34
how Congress can insert itself into this
4:38
If that bill were to make it through
4:40
Congress and become law, that would be
4:42
the pay raise for federal employees. Pay
4:44
parody is something you may hear about
4:47
in 2026 because of this discrepancy
4:51
between the military and the uh federal
4:54
workforce in terms of what's being
4:56
proposed for the pay raise. As I
4:58
mentioned, the White House budget didn't
5:00
mention a raise for federal employees,
5:01
but it is proposing a 3.8% raise for
5:04
members of the military.
5:06
And so oftentimes pay parody will be an
5:10
argument for giving one group or the
5:13
other a higher raise. In this case, prop
5:16
uh proponents for the federal workforce
5:18
are saying, "Hey, we need pay parody
5:20
to have a raise that's equal with
5:22
members of the military." And that would
5:24
be a much higher raise obviously 3.8%
5:27
versus no raise. So that's the concept
5:31
of pay parody. It's just making the two
5:33
groups equal. This table that I'm
5:35
putting up on the screen shows how the
5:37
average military and civilian pay raises
5:40
have come out since 2003. And generally
5:43
speaking, military payraises have come
5:46
out higher. Since 2007, the military
5:50
payraises have often outpaced federal
5:53
employee raises. And there have even
5:54
been some years where federal employees
5:57
did not get a raise. I mentioned the
5:59
three years during the Obama
6:00
administration. Um, and there are years
6:03
when there's a pretty decent
6:04
discrepancy. 2025, this year, is a good
6:07
example of that. The military raise, was
6:09
more than double what federal employees
6:11
got. On the other hand, there are quite
6:13
a few years where both groups got the
6:15
same number of raises. But this is uh
6:18
some historical data on on how pay
6:21
parses. So, what happens next? As I
6:24
said, the alternative pay plan letter is
6:27
expected to be issued in August. That's
6:29
usually later in the month.
6:31
and it will spell out whatever the
6:34
president wants the pay raise to be for
6:36
the coming year. As I said, I expect
6:39
it's going to propose a pay freeze or no
6:42
pay raise, but we could be surprised.
6:46
And regardless of what it proposes,
6:48
Congress could still get involved and
6:50
override whatever the president is
6:52
proposing. I think that's very unlikely
6:55
to happen, but it can happen. Um,
6:59
assuming Congress does not get involved,
7:01
as I expect, then the next step would be
7:04
in December, the president will issue an
7:06
executive order formalizing the pay
7:09
raise and finalizing it. And then
7:11
shortly after that, the Office of
7:13
Personnel Management will issue new pay
7:14
tables for the coming year that include
7:17
the raise or lack thereof. Regardless of
7:19
whatever the outcome of next year's pay
7:21
raise may be, we'll be providing more
7:23
updates as soon as they become
7:24
available. So, please subscribe to the
7:26
channel and also visit the fedsmith.com
7:28
website where we'll be posting articles
7:31
with more information on this and other
7:33
topics. Have a good day.
