IG Investigations Starting to Find More Problems with Locality Pay and Telework Practices
As telework has increased and the number and size of locality pay areas have grown, new problems have arisen. Senator Joni Ernst (R-IA) has focused on this issue. She has been asking agency inspectors general about the number of employees in agencies using telework to receive a higher locality rate even though they work in a less expensive area.
Her efforts are starting to show results. In an investigation of one agency, the investigative report found that 80% of the 25 remote employees identified in a study had an incorrect duty station and were being paid a higher amount of locality pay.
In a more recent investigation, the Department of Commerce Office of the Inspector General’s report found one in four of the department’s employees sampled had moved to areas with lower rates of pay but still received the higher pay rates associated with higher cost of living areas.
The Commerce Department report found:
- 23% of employees sampled were getting overpaid;
- Employees took nearly a year in some instances to update their duty station, which dictates their locality pay, costing $42,985 in overpayments;
- The Department of Commerce can’t verify employees are showing up to the office as required; and
- Commerce is declining to try and recover overpayments because they lack processes to make sure employees change their duty stations when they begin teleworking, citing that “bureaus do not have adequate controls in place to ensure changes in duty stations are initiated and processed in a timely manner.”
A press release from Senator Ernst noted she has been demanding investigations into 24 federal agencies to determine the impact of telework on the delivery and response times of federal agency services.
Number of Federal Employees Under Locality Pay Increasing
Since 2015, the federal government’s locality pay areas (LPA) have increased from 34 to 58, or about 71%. This increase includes the four new areas designated as LPAs in 2024. Locality pay areas have different pay rates for the federal government’s General Schedule employees. The rate of any pay increase frequently varies between the pay areas.
While the number of new locality pay areas since 2015 is impressive, the actual increase in the number of employees covered is much larger. For example, in 2024, while four new locality pay areas were added to the pay system, about 33,000 federal employees were added. Many federal employees were added to existing locality pay areas rather than creating new LPAs as the definition of the pay areas continues to evolve and expand.
The “Rest of the US” category of locality pay is shrinking. In 2023, most federal employees (1,546,343 or 68.7%) were in a locality pay area. These figures do not include approximately 33,000 federal employees added to the system for 2024.
The locality pay system will eventually include the vast majority of federal employees as more are being added yearly, as changes are recommended by the Federal Salary Council, approved by the President’s Pay Agent, and implemented by the Office of Personnel Management.
Average Federal Salary Growing
Locality pay has substantially increased the salary levels for federal employees. The latest figures reported by the Office of Personnel Management pinpoint $101,000 as the average federal salary. Information from OPM on the average salary since the 2024 pay raise of 5.2% is now available. The latest data from OPM were for September 2024 so the new 2025 average may not be available for some time. The average federal salary for 2024 is probably about $106,880 with the latest pay raise.
The average federal salary has gone from $90,510 in 2020 to about $106,000 in 2024. For more information on federal salary history, check out 2024 Pay Raise Highest in 40+ Years—54 Years of Federal Pay Raises.
How to Receive Higher Pay and Lower Expenses
As the number of locality pay areas has grown rapidly, the size of existing locality pay areas has also grown substantially. If a person can cut his or her expenses and still receive pay raises, the purchasing power of a family will grow substantially.
By working at home, a federal employee can live in a rural area with lower expenses, oftentimes far outside the central city in a locality pay area, and still receive the higher pay scale in a locality pay area. While commuting from these rural areas is not practical because of the time to go to and from work, many more people now work at home. If the home is in a low-cost area, but the low-cost area has been added into a high-paying locality area by the Federal Salary Council and the President’s Pay Agent, a federal employee effectively makes a great deal more money.
Here is one example.
These two places are both in the Washington, DC locality pay area. According to Zillow, a house in Hampshire, West Virginia, averages $245,073 and is trending up 6.4% in the last year. According to Zillow, the average home in Alexandria, Virginia, is $652,286, up 6.8% over the last year as of the time of this writing.
With the difference of about $407,000 or more in housing costs alone (not including higher taxes and higher cost of groceries) and receiving the same salary in both locations, there is a big difference in expenses. In Alexandria, the median property tax (also known as real estate tax) is $4,061.00 per year, based on a median home value of $486,800.00 and a median effective property tax rate of 0.83% of property value. In Hampshire, WV property taxes are about $543.00 per year based on a median home value of $134,100.00 and a median effective property tax rate of 0.40% of property value at the time of this writing.
Nevertheless, federal employees receive the same 33.26% locality pay adjustment in both locations.
