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Pay Setting Information

It is important to pay employees equitably and fairly and, at the same time, spend employment funds economically. Proper pay setting requires applying principles of good management and complying with laws and regulations. It involves consideration of:

  • local conditions that affect recruiting and retaining qualified employees;
  • equitable treatment of employees;
  • affect of pay actions on other employees; and
  • the employee's qualifications and service history for the position being filled.


Setting pay is one of the most important functions of a personnel specialist. Done properly, it can help motivate employees. Done improperly, it can cause employee dissatisfaction. The following describes the pay setting process for federal employees.

Congress passes laws establishing federal pay policies. These laws are placed in Title 5 of the United States Code (USC). The laws give the Office of Personnel Management (OPM) the authority to issue regulations to implement Title 5 USC pay policies. These regulations are published in the Code of Federal Regulations (CFR), Title 5. OPM also publishes guidance, requirements, and instructions on applying these pay policies and regulations. Agencies usually establish their own directives to supplement and interpret government-wide directives.

When pay is set, the pay policies which apply to the pay system covering that position are used. There are several Federal employee pay systems in the Executive branch. The most common pay systems are:

General Schedule (GS): covers the majority of "white-collar" employees in the Federal government.

Federal Wage System (FWS): covers most Federal "blue-color" employees. There are separate wage schedules for Wage Grade (WG), Wage Leader (WL), and Wage Supervisor (WS) positions. FWS pay is based on the prevailing rates paid by private industry in a particular wage area.

Senior Executive Service (SES): covers most managerial, supervisory, and other policy-making jobs above grade GS-15 through Executive Level IV.

Executive Level System: covers members of the Cabinet, Deputy Secretaries, Under Secretaries, Assistant Secretaries, and others in equivalent kinds of positions.

The grade of a position is determined through the position classification process. Then the senior manager, through the Personnel Office, applies other pay setting considerations. An employee's pay is documented on a Standard Form (SF) 50, Notification of Personnel Action. Supervisors authorize payment for work performed. Payroll Offices pay employees based on the SF50 information and information submitted through their time and attendance system. Employees who believe their pay is not correct should pursue their concerns with the Personnel Office. If an employee's concern is not satisfactorily resolved within his or her employing agency, the employee may file a claim with the Office of Personnel Management (OPM). The OPM settles claims against the government, including claims for pay from government employees.

In addition to basic pay, most General Schedule employees in the continental U.S. are entitled to locality pay. 

Pay Setting for a Promotion 


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