Legislation has been introduced, this time in the House of Representatives, to potentially eliminate higher locality pay rates for federal employees who telework at least one day per week.

The Federal Employee Return to Work Act (H.R. 10014) has been introduced by Congressman Dan Newhouse (R-WA). It is companion legislation to a bill that was introduced at the end of July by Senator Bill Cassidy (R-LA).

Both bills propose to put federal employees who telework at least one day per week into the “Rest of U.S.” locality pay region which is the area with the lowest locality pay percentage of all locality pay areas.

How much lower? FedSmith author Ralph Smith has analyzed the impact locality pay rates can have on a federal employee’s salary over time.

He found that a GS12, step 5 federal employee in the “Rest of U.S.” locality pay area received an 18.51% pay increase over a seven-year period, the lowest among all locality pay areas. By way of comparison, the total pay increase over the same time period was 25.86% for Miami, 21.6% in Washington, DC, and 21.16% in Boston.

In the same article, Smith noted:

In 2023, most federal employees (1,546,343 or 68.7%) were in a locality pay area. These figures do not include the 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, with the changes being recommended by the Federal Salary Council, approved by the President’s Pay Agent, and implemented by the Office of Personnel Management.

Data from the Office of Personnel Management (OPM) show that almost 70% of federal employees are in a locality pay area other than “Rest of U.S.” and more are being added all the time. 

In other words, the proposal to reduce locality pay for teleworking federal employees would have a significant financial impact over time.

How Many Federal Employees Telework?

According to the White House Office of Management and Budget (OMB), half of the federal workforce teleworks and the other half are not eligible due to the nature of their jobs. Of those who telework, 60% of their work is done onsite.

According to OPM, there are 2,188,329 full-time federal employees as of March 2024. If approximately half of them telework, this is 1,094,165 federal employees. There are probably about 754,975 employees (69%) in a locality pay area based on the OPM figures.

Why Are Lawmakers Targeting Telework?

Because of the rapid expansion of locality pay areas combined with the increase in the use of telework, federal employees can potentially live in a more rural area and still get the higher pay that goes along with living and working in a more expensive urban area.

In his analysis of the expansion of locality pay areas, Ralph Smith also wrote:

With the rapid expansion and geographic enlargement of existing pay areas, employees in rural areas are now getting higher salaries just as if they were living in downtown cities like Boston, New York, or Washington, DC.

In reality, they may be hours away from the federal offices to which they are assigned. While some may drive or take a train for this distance, many probably work at home. If that can be done, the advantages are significant.

Compare these two places, both in the Washington locality pay area. According to Zillow, a house in Hampshire, West Virginia, averages $225,849 and is trending up 4% in the last year as of the time of this writing. According to Zillow, the average home in Alexandria, Virginia, is $612,093, up 4.7% over the last year as of the time of this writing.

With the difference of about $386,000 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 as of the time of this writing.

Nevertheless, federal employees receive the same 33.26% locality pay adjustment in both locations.

This has, in fact, begun happening. Reports have surfaced showing the abuse that can arise from the situation.