President Obama and Congress have approved an average of 1.3% annual raise to federal employees including both military and civilian. This raise will be the largest cost-of-living increase for federal employees since 2010. In 2011, 2012 and 2013 these employees had all raises suspended due the pay freeze during that time. It’s worth noting though, that the military raise typically mirrors the increase in the Civilian Employment Cost Index (ECI) if not slightly exceed it. The current ECI is at 2.1% which means our servicemembers won’t be keeping pace with their civilian counterparts… Again.
This raise will give all uniformed military personnel a 1.3% raise to their monthly pay while civilian federal employees will be given a raise of 1% across the board with certain parts of the country receiving a slightly higher increase creating the 1.3% average.
In the past, with the exception of the years during the pay freeze, the federal annual raise typically mirrors the increase in the Employment Cost Index (ECI) if not slightly exceeds it. The current ECI is at 2.1% for a 12-month period.
However, according to federal law the President of the United States does have the right to adjust the pay rates up or down as necessary if it is determined there is a “national emergency or serious economic conditions affecting the general welfare.” Congress must then be notified of the decision by September 1 of the year in question where they have a final say in the matter.
An executive order confirming the rate of annual raises will usually be granted in December and will take effect on January 1 of the following year.
Documentation from the Congressional Research Service outlines the process of military and civilian federal employees pay increases in more detail.
Basic Pay: Increases Are Linked to Increases in the Employment Cost Index (ECI)
Section 1009 (c) of Title 37 provides a permanent formula for an automatic annual increase in basic pay that is indexed to the annual increase in the Employment Cost Index (ECI) for “wages and salaries, private industry workers.” For 2000-2006, the law required the military raise to be equal to the ECI increase plus an additional one half percentage point (i.e., if the ECI annual Military Pay: Key Questions and Answers Congressional Research Service 9 increase were to be 3.0%, the military raise would be 3.5%). For 2007 and onwards, the law required the raise be equal to the ECI (although Congress continued to enact increases above the ECI through 2010).
The automatic adjustment is tied to the increase in the ECI from the 3rd Quarter of the third preceding year to the 3rd Quarter of the second preceding year. For example, in the 12-month period between the quarter which ended in September 2010 and the quarter which ended in September 2011, the ECI increased by 1.7%. Hence the pay raise for 2013, as calculated by the statutory formula, was 1.7%. This methodology means there is a substantial lag between increases in the ECI and increases in basic pay; the lag appears to be related to the stages of the federal budget process.12 However, under subsection (e) of this statute, the President can specify an alternative pay adjustment that supersedes the automatic adjustment. President Obama invoked this option with regards to the 2014 and 2015 pay raises. Additionally, Congress can pass legislation to specify the annual pay raise, which would override the automatic adjustment and/or any presidential adjustment if it were enacted into law.
Congress Usually Sets the Amount of the Military Pay Raise, Although This Has Become Less Common In Recent Years
Despite the statutory formula, which could operate each year without any further action, Congress almost always legislated a particular percentage increase in military pay every year until quite recently. For the pay raises effective in calendar years 1981 to 2010, the only one that Congress did not specify in law was the one which took effect in 1983. This pattern has changed in more recent years, with no general pay raise provision enacted for calendar years 2011, 2012, 2014, and 2015, thereby allowing the permanent formula or the presidential alternative adjustment to go into effect. However, even when the statutory formula is overridden, it remains important in determining the pay adjustment as it provides a benchmark around which alternatives are developed and debated.
Source: Congressional Research Service