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Federal Pay Raise 2026: What the 1% Increase Really Means for Federal Employees
The federal pay raise 2026 has now been finalized, ending months of uncertainty for federal employees who closely monitor annual pay decisions. On December 18, Donald Trump signed an executive order confirming a 1% across-the-board pay increase for most civilian federal employees, marking the smallest federal pay adjustment since 2021.
This decision follows an alternative pay plan issued earlier in August, which also proposed a 1% increase for civilian employees in 2026 signaling a consistent approach to restrained pay growth rather than a last-minute revision.
Alongside the executive order, the White House released updated pay tables for several federal employee pay schedules, including references to “Locality-Based Comparability Payments.” However, despite those tables, the executive order does not authorize any locality pay increases for 2026, meaning locality rates will remain unchanged from 2025 levels.
The federal employee pay raise 2026 will take effect during the first full pay period beginning on or after January 1, 2026.
While the 1% headline figure may seem straightforward, its real impact is not. To understand what this raise actually means, federal employees must look beyond the number itself—to budget priorities, locality pay policy, and how pay decisions influence long-term federal retirement outcomes. This guide walks through those implications step by step, so you can see how the 2026 pay raise affects both your current income and your future financial planning.
Why the Federal Pay Raise 2026 Matters More Than the Number
For 2026, the administration finalized a 1% across-the-board federal employee pay raise 2026 for most civilian federal workers. This is the smallest increase since 2021 and follows a year in which the 2026 budget request did not explicitly include any federal employee pay bump leading many observers to expect no raise at all.
At first glance, a 1% federal employee pay raise 2026 may seem insignificant, especially after several years of larger increases. However, context is critical.
Earlier in the year, the administration’s 2026 budget request did not include any proposed civilian pay raise. That omission led many analysts and employee groups to expect either a pay freeze or a minimal adjustment. Against that backdrop, the finalized raise represents a conscious policy choice to allow limited pay growth while tightly controlling overall federal compensation costs.
The final decision signals intentional restraint in federal wage growth after years of larger adjustments. It matters because pay raises affect not only take-home pay but also retirement calculations, cost-of-living competitiveness, and long-term earnings trajectories.
In other words, this federal pay raise is less about boosting purchasing power and more about signaling fiscal restraint while avoiding a zero-increase year.
What Was Approved Under the Federal Pay Raise 2026
Under an executive order issued by Donald Trump, the following changes apply:
- A 1% across-the-board base pay increase for most civilian federal employees
- No locality pay increase for any geographic area
- A potential additional 2.8% increase for certain law enforcement personnel, bringing their total raise in line with the 3.8% military pay increase
- An effective date of the first applicable pay period beginning on or after January 1, 2026
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The Office of Personnel Management, led by Scott Kupor, has been directed to work with agencies to identify which law enforcement roles qualify for the higher increase.
For most General Schedule employees, however, the federal workers pay raise is limited to the 1% base increase.
For a detailed breakdown of the executive order and how the 2026 pay raise was finalized, you can read our analysis of Trump’s 2026 federal pay raise plan.
Locality Pay: Why It’s Staying Flat This Year
Locality pay is intended to adjust federal salaries based on regional cost-of-living differences. In most years, locality adjustments account for a significant portion of the overall federal employee raise.
For 2026, locality pay is staying flat. This decision reflects a common cost-control strategy: when administrations want to limit total pay growth, locality adjustments are often the first lever reduced or paused.
As a result:
- Employees in high-cost areas will not see pay increases aligned with local inflation
- Geographic pay gaps remain unchanged
- Overall compensation growth is kept to a minimum
While the base federal pay raise 2026 technically applies nationwide, its real-world value varies widely depending on where employees live and work.
Why the Lack of Locality Pay Affects Retirement Too
Locality pay is not just about current income—it is also pensionable. That means it counts toward an employee’s high-three average salary, which is used to calculate federal retirement benefits.
When locality pay does not increase:
- High-three averages grow more slowly
- Pension calculations are slightly lower over time
- Survivor benefits tied to salary are also affected
This effect is subtle in any single year, but over the course of a career—especially near retirement—it can compound.
A modest pay raise and flat locality pay can quietly affect your high-three, pension, and retirement timeline more than many federal employees realize. If you want to understand exactly how the 2026 federal pay raise impacts your retirement and what adjustments could make the biggest difference, a personalized federal retirement review can help bring clarity.
Schedule a one-on-one consultation to see how today’s pay decisions shape your long-term retirement outcome.
How the Federal Pay Raise 2026 Affects Federal Retirement
Federal retirement benefits under FERS are based largely on two factors: years of service and the high-three average salary.
High-Three Impact by Career Stage
- Early- and mid-career employees: The 1% federal employee pay raise has little long-term impact. Future promotions, step increases, and additional years of service will outweigh this single adjustment.
- Employees within three years of retirement: The raise does count toward the high-three, but typically increases annual pension income by tens of dollars per year, not hundreds. It is meaningful, but modest.
TSP Considerations
The federal pay raise does not automatically improve Thrift Savings Plan outcomes. Agency contributions remain percentage-based, meaning:
- A 1% raise results in only a small dollar increase
- The long-term benefit depends on whether employees adjust contribution rates
Without action, the retirement impact is minimal.
The Impact of This Raise Across the Federal Workforce
The federal employee pay raise 2026 affects employees differently depending on circumstances:
This uneven impact explains why reactions to the federal workers pay raise vary so widely across agencies and locations.
What Federal Employees Should Do Next to Maximize the Benefits
While the federal pay raise 2026 is modest, employees can still take steps to maximize its value:
- Review TSP contribution rates - Even small raises can be leveraged by increasing contribution percentages.
- Update retirement projections - Employees within five years of retirement should account for slower high-three growth.
- Monitor OPM guidance - Especially important for law enforcement and specialized pay categories.
- Plan conservatively for future raises - Assume modest increases rather than inflation-matching adjustments.
- Seek personalized planning advice if retirement is near - Small salary changes can still influence timing and benefit decisions.
Final Thoughts
The federal pay raise 2026 is intentionally restrained. It reflects broader budget priorities rather than a shift away from the federal workforce. While the increase will not dramatically change take-home pay or retirement outcomes, it reinforces an important reality for federal employees:
Long-term financial security depends far more on planning and strategy than on any single year’s federal employee raise.
Understanding how this raise fits into your career stage, locality, and retirement timeline is the key to making informed decisions going forward.
Frequently Asked Questions
What is the federal pay raise 2026?
The federal pay raise 2026 provides a 1% across-the-board base pay increase for most civilian federal employees, effective with the first full pay period on or after January 1, 2026.
Does the federal employee pay raise 2026 include locality pay?
No. The federal employee pay raise 2026 does not include any locality pay increase. All locality rates will remain at their 2025 levels.
When does the federal pay raise 2026 take effect?
The raise takes effect during the first full pay period beginning on or after January 1, 2026, not on January 1 itself.
Why is the federal pay raise 2026 only 1%?
The 1% increase reflects budget restraint. The administration’s 2026 budget request did not initially propose a civilian pay raise, making the finalized increase a limited adjustment rather than a full inflation-based raise.
How does the federal pay raise affect retirement?
The raise slightly increases an employee’s high-three average salary, which is used to calculate federal retirement benefits. The impact is modest and most noticeable for employees within three years of retirement.
Does locality pay count toward federal retirement?
Yes. Locality pay is pensionable and included in the high-three calculation. Because locality pay is flat for 2026, retirement salary averages will grow more slowly.
How does the federal employee raise affect TSP contributions?
The raise only increases TSP contributions if employees adjust their contribution percentage. Agency automatic and matching contributions remain percentage-based, so the impact is otherwise minimal.
Are law enforcement officers receiving a higher pay raise in 2026?
Some federal law enforcement personnel may receive up to a 3.8% total increase, aligning with the military pay raise. Eligibility will be determined by guidance from the Office of Personnel Management.
Can Congress change the federal pay raise 2026?
Yes. Congress has authority to modify federal pay through legislation or appropriations, though changes are not guaranteed.
Where can federal employees find official 2026 pay tables?
Official 2026 General Schedule and locality pay tables will be published by the Office of Personnel Management on its website before the raise takes effect.
Disclaimer
This content is provided for educational and informational purposes only and should not be construed as legal, tax, or individualized financial advice. Federal pay rules, retirement benefits, and eligibility requirements are subject to change based on legislation, executive action, and agency guidance.
Content Sources & References
- Office of Personnel Management (OPM)
- Federal Employees Pay Comparability Act (FEPCA)
- White House Executive Orders and Pay Tables
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Jeremy Haug
Jeremy is a seasoned contributor for Federal Pension Advisors bringing years of experience in helping federal employees understand their pension and benefits. His goal is to make retirement planning clear, practical, and empowering.
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