The question of what the 2025 federal pay raise will be has entered the spotlight early this year. A bill introduced in Congress proposes raising federal salaries by 7.4% in 2025. This Federal Adjustment of Income Rates (FAIR) Act aims to close the growing gap between federal and private sector pay. But will this ambitious plan come to fruition?
The Federal Pay Raise Outlook for 2025
In 2023 and 2024, federal employees received raises averaging 4.6% and 5.2% respectively. These were the largest increases in many years. However, the sponsors of the FAIR Act say inflation and broader labor market trends mean these raises have not gone far enough.
The Act would give federal workers a 4% across-the-board raise. It would also increase locality pay by an average of 3.4%. Combined, this would amount to a 7.4% average pay bump.
Why Support a 7.4% Pay Raise?
Proponents like the FAIR Act’s Congressional sponsors cite the following reasons for the proposed 7.4% increase:
- The federal-private sector pay gap – Pay for federal jobs currently lags private sector roles by 27.5% on average. The raises so far have not made a dent in this disparity.
- Recruitment and retention challenges – Many agencies are struggling to recruit and retain talent, especially in high-demand fields like cybersecurity. Better pay is needed to compete.
- Rising inflation – Even with recent raises, inflation has eroded federal employees’ purchasing power. A 7.4% boost would help make up for this.
- Fair compensation for essential work – Federal employees deserve pay reflective of their important contributions, especially after enduring pay freezes, shutdowns, and more over the years.
What Are the Odds of a 7.4% Raise Being Approved?
The FAIR Act faces challenges in becoming law. It has the support of federal unions and some Congressional Democrats. However, federal pay raises are typically determined through the White House’s budget proposal process.
President Biden’s 2025 budget request is still forthcoming. But in prior years he has followed the federal pay formula, which yields a 4.5% raise for 2025. If Congress remains silent, this 4.5% raise can take effect without passing a new law.
What We Know So Far About the 2025 Pay Raise
While the final figure remains uncertain, here’s what’s clear at this early stage:
- The first formal 2025 raise proposal is for 7.4% via the FAIR Act.
- Federal unions and some Democrats in Congress support the 7.4% plan.
- Biden has stuck close to the federal pay formula’s raises in past budgets. This formula points to 4.5% for 2025.
- Congress has not objected to Biden’s prior proposed raises, allowing them to automatically take effect.
- Budget delays mean Biden’s 2025 request may not be revealed until March or later.
Other Key Contexts on Federal Pay
Besides the FAIR Act’s 7.4% proposal, additional context shaping the 2025 pay debate includes:
- The federal-private sector pay gap has grown from 26.52% in 2020 to 27.54% in 2023 per the Federal Salary Council.
- A Defense Business Board report highlighted an average 22.47% DoD civilian-private sector pay disparity, making recruiting difficult.
- The federal pay formula tied to the Employment Cost Index has generated only partial pay raises since the 1990s, widening the pay gap over time.
- Federal employee satisfaction with pay has declined government-wide from 2020 to 2023 according to OPM survey data.
Bottom Line
In summary, all eyes will be on President Biden’s 2025 budget proposal this spring for clarity on federal pay raises next year. The FAIR Act’s push for a 7.4% increase reflects federal employee advocates’ view that significant pay growth is overdue.
Frequently Asked Questions About the 2025 Pay Raise
When will the final 2025 federal pay raise be announced?
The final raise is typically announced in August or September via an executive order from the President. This comes after the initial budget proposal was released earlier in the year.
How is the federal pay raise amount determined?
By default, it is determined by the rate dictated by the federal pay formula. However, the President can override this in the budget request, and Congress can pass legislation to set a different raise.
Who gets a federal pay raise?
The raise applies to most civilian federal employees across all three branches of government. Military personnel receive a separate pay increase determined by the DoD budget.
Can federal employees expect to get 7.4% in 2025?
It’s unlikely but possible. Much depends on whether President Biden proposes something similar in his budget and if Congress pushes for a bigger raise.
What was the federal pay raise in 2024?
For 2024, federal employees received an average raise of 5.2%, divided between a 4.1% base increase and an average 1.1% bump to locality pay.
