President Trump proposed a pay freeze for most federal employees at the end of August in his annual pay plan letter. In other words, there would be no pay raise for most of the federal workforce in 2027, but his proposal did include a 3.8% pay raise for certain federal employees in law enforcement. While this is an important step in the annual pay raise process, it does not mean the pay freeze is set in stone… yet.

How Does the Federal Pay Raise Actually Get Finalized?

The Federal Employees Pay Comparability Act of 1990 (FEPCA) sets up a default formula for annual federal pay adjustments tied to changes in the Employment Cost Index. Followed as written, that formula would produce a large increase almost every year, one no president on either side of the political aisle has ever implemented.

Instead, the law offers an alternative. If the president determines that “national emergency or serious economic conditions affecting the general welfare” make the formula raise inappropriate, he can propose an alternative pay adjustment. To do this, he has to transmit a letter to Congress by September 1 laying out the alternative plan and the reasoning behind it.

That letter is where most of the public attention lands each year, but it’s a required notice to Congress, not the final word. The actual rates of pay don’t change until the president signs an executive order — typically in mid-to-late December — adjusting the pay schedules in line with the plan. That executive order, due before the end of the year, is the step that locks in next year’s pay tables.

How Can the Pay Raise Change?

Congress

Congress can override the president’s proposed pay raise, but it’s a more involved process; it requires legislation to pass both the House and Senate and then be signed into law by the president, which is why it usually doesn’t happen.

The FAIR Act is a good example. Although it has never become law, it has been introduced every year for over a decade and proposes a raise that is always higher than what federal employees ultimately receive. For 2027, it calls for a 4.1% raise.

Congress has actually done this before, in two different ways. In 2008, lawmakers used the year-end appropriations bill to raise President Bush’s proposed 3.0% average increase to 3.5%, matching that year’s military pay raise, a change that took effect on schedule in January, not retroactively. In 2019, Congress went further: after Trump’s pay freeze had already taken effect through a December executive order, lawmakers passed a spending bill in February that set a 1.9% raise, retroactive to the start of the year.

There’s a reason to watch the calendar closely for 2027. Congress just passed a stopgap funding bill that keeps the government open only through Dec. 11, right around when the 2027 pay executive order would typically be signed. If a full-year spending deal isn’t in place by then, the pieces are in position for something similar to 2019 to play out again.

The President

Because the pay raise isn’t finalized until the president issues an executive order toward the end of the year, he can also change his own proposal. While it’s unusual, this has happened before.

In 2016, President Obama issued a revised alternative pay plan that modified his earlier one, increasing the raise for civilian federal employees to match a raise Congress had just set for the military. He had proposed an average 1.6% raise back in August 2016, then revised it to 2.1% that December, the number that took effect when he signed that year’s executive order.

Based on where things currently stand in the annual pay raise process, any of these could happen to flip the pay freeze into a pay raise.

Does the COLA Change Too?

We’ve had several questions from readers and viewers on our YouTube channel asking if they’ll still get the COLA despite the proposed pay freeze. The COLA and the pay raise (or freeze) are not the same thing.

The COLA only applies to retired federal employees receiving an annuity. It’s an annual increase applied to their monthly annuity payments. The pay raise applies only to current federal employees. The pay raise is set through the political process described above; the COLA, by contrast, is determined by an automatic formula based on the annual change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The COLA is announced in October, and any increase shows up in annuity payments beginning in January of the following year. FedSmith will provide full coverage of the 2027 COLA once it’s announced.

Between the Letter and the Order

The freeze in Trump’s August letter reflects where things stand today, not necessarily where they’ll land. Congress could still pass legislation setting a different number, as it has done before, both on schedule and after the fact, or the president could revise his own plan between now and December, as Obama did in 2016.

Neither is the way to bet based on how last year’s cycle played out; the August letter and the December executive order matched almost exactly. But the 2027 pay year isn’t actually decided until one of those things happens, or until Trump signs the executive order in December without making any changes. FedSmith will track developments in Congress and provide updates, along with our GS pay tables, if anything moves before then.