Pay Setting Information

It is important to pay employees equitably and fairly and, at the same time, spend employment funds economically. Proper pay setting requires applying principles of good management and complying with laws and regulations. It involves consideration of:
  1. Local conditions that affect recruiting and retaining qualified employees.
  2. Equitable treatment of employees.
  3. Employee's qualifications for the position being filled.

Setting pay is an important function of a human relations specialist. Done properly, it can help motivate employees. Done improperly, it can cause employee dissatisfaction. The following describes the pay setting process for Federal civilian employees.

Laws establishing Federal civilian pay policies that are placed in Title 5 of the United States Code (USC). These laws give the Office of Personnel Management (OPM) the authority to issue regulations to implement the pay policies. These regulations are published as the Code of Federal Regulations (CFR). OPM also may publish additional guidance, requirements, and instructions on applying the pay policies and regulations. Agencies, as well, may establish directives to supplement and interpret the Government-wide directives.

When pay is set, the pay policies that apply to the pay system covering that position are used. There are several Federal employee pay systems in the Executive branch. The most common pay systems are:

General Schedule (GS): Covers the majority of "white-collar" employees in the Federal Government.

Federal Wage System (FWS): Covers most Federal "blue-collar" employees. There are separate wage schedules for Wage Grade (WG), Wage Leader (WL), and Wage Supervisor (WS) positions. FWS pay is based on the prevailing rates paid by private industry in a particular wage area.

Senior Executive Service (SES): Covers most managerial, supervisory, and other policy-making jobs above grade GS-15 through Executive Level IV.

Executive Level System: Covers members of the Cabinet, Deputy Secretaries, Under Secretaries, Assistant Secretaries, and others in equivalent kinds of positions.

The commander, through the human resources office, sets pay.

An activity's discretionary pay rules are established in their local pay-setting policy. Two of the most common pay setting procedures are those used in promotions and when setting pay based on an employee's Highest Previous Rate (HPR). Government-wide promotion rules are nondiscretionary and must be applied unless an activity's discretionary pay setting policy provides a greater benefit to the employee. Use of HPR, on the otherhand, is a discretionary pay setting practice and, therefore, an activity's pay setting policy must be reviewed to determine to what extent HPR is applicable. Promotion and HPR rules applicable to the General Schedule and the Federal Wage System are described in the references. Because there are exceptions to the rules and unique or discretionary situations, pay setting must always be accomplished using the activity's pay setting policy and through a close review of the Federal rules and regulations.

Content last reviewed: 5/30/2006-RJM

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This page was last revised: 12/5/2011