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The omnibus spending package Congress passed Mon. Dec. 21 — to fund federal agencies through the fiscal year and provide further COVID-19 relief — signals a 1 percent pay raise for federal employees in 2021.
If signed by President Trump, the package would also give federal employees a longer timetable to pay back payroll taxes that were deferred for the last few months of 2020.
UPDATE 12/28/2020: President Trump signed the spending package on Sunday night (Dec. 27, 2020)
2021 Federal Pay Raise
The bill’s silence on the issue of federal employee pay next year essentially endorses President Trump’s alternative pay plan issued in February which proposed a 1 percent across-the-board pay increase in 2021 and no changes to locality pay rates. Uniformed military service members are scheduled to receive a 3 percent pay raise in 2021.
Groups representing federal employees expressed concern regarding the 1 percent pay raise.
“Through its silence, the spending bill preserves the 1 percent federal pay raise proposed earlier this year,” said NARFE National President Ken Thomas. “But that amount does little to compensate the extraordinary efforts of our dedicated public servants, many of whom will oversee $900 billion in pandemic relief. It also falls short of the justifiable 3 percent pay increase for military service members, who rely on our nation’s civil servants for support.”
“Federal employees worked throughout the pandemic, keeping this country moving forward,” said NTEU National President Tony Reardon. “Despite their dedication, they are receiving a pay raise that is too low and does little to alleviate rising health care premiums and the pay gap that exists between them and their private-sector counterparts.”
The president will need to sign an executive order to implement any pay raise plan for 2021. Then the Office of Personnel Management will publish the official pay charts with locality information.
Extended Time to Pay Back Deferred Payroll Taxes
The spending package also provides extended time to pay back payroll taxes that were deferred from September through December of this year for federal employees earning less than $104,000. Instead of having the deferred taxes withheld from their paycheck for the first four months of 2021, the withholdings will now be spread out over 12 months in 2021.
“We were worried about the financial burden the deferral was going to place on middle-class federal employees and their families in 2021, and we think this is a fair resolution to a shortsighted policy that was forced upon civilian workers and military service members in the executive branch,” Reardon said.