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The Government Raise Shock: Why The 3.3% Federal Pay Projection For 2026 Was Slashed To 1%

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The question "What is the government raise for 2026?" has a complex and often frustrating answer for public servants globally, particularly in the United States. As of December 20, 2025, the projected pay increase for most U.S. federal employees under the General Schedule (GS) is officially set at a 1% across-the-board increase, a figure that has sparked significant debate and disappointment among the federal workforce. This finalized alternative plan directly overrides the much higher statutory increase of 3.3% that was originally indicated by the Employment Cost Index (ECI) data, highlighting the persistent tension between economic reality and political budget decisions.

The 2026 government pay landscape is a tale of two numbers: the technical, data-driven figure mandated by law, and the lower, politically determined figure set by executive action. This article breaks down the official projections, the legal mechanisms, and the crucial locality pay updates for 2026, providing a fresh, in-depth look at what government employees in the US, UK, Canada, and Australia can actually expect to see in their paychecks.

The Shocking US Federal Pay Raise: 3.3% vs. 1% for 2026

The process for determining the U.S. federal employee pay raise is governed by the Federal Employees Pay Comparability Act (FEPCA) of 1990. This legislation sets a default mechanism tied to private-sector wage growth, but it grants the President the authority to issue an "alternative pay plan" to set a lower figure, which is what has occurred for 2026.

The Statutory Default: The 3.3% ECI-Based Raise

The statutory pay raise is calculated based on the year-over-year change in the Employment Cost Index (ECI) for private-sector wages and salaries, minus 0.5 percentage points.

  • ECI Data Point: The Federal Salary Council (FSC) reported that the ECI increased by 3.8% in September 2024.
  • Statutory Base Raise: Applying the FEPCA formula (3.8% ECI - 0.5%), the default, non-political base pay increase for the General Schedule (GS) in January 2026 should have been 3.3%.

This 3.3% figure is what is legally required to automatically take effect if the President does not intervene with an alternative plan by August 31st. The Federal Salary Council has consistently highlighted that this mechanism is necessary to close the significant pay disparity, which was reported to be an average of 24.72% between federal and private-sector employees in 2024. [cite: 7 from step 2, 3 from step 1]

The Finalized Alternative Plan: The 1% Across-the-Board Increase

Despite the data-driven 3.3% figure, the Executive Branch issued an alternative pay plan for 2026, which ultimately set the base pay raise significantly lower.

  • The Finalized Raise: Most federal civilian workers are set to receive a 1% across-the-board base pay increase for 2026.
  • Locality Pay: Crucially, this alternative plan also explicitly stated that there would be no locality adjustments applied for the 2026 calendar year.

This decision means that the total raise for a federal employee is simply the 1% base increase, which is well below the current and projected inflation rates and does little to address the private-sector pay gap. The use of the alternative pay plan is a common practice used to control federal spending, but it is a major source of frustration for the 2.2 million-strong federal workforce.

Key Entities and New Locality Pay Areas for 2026

While the overall raise is set at 1%, the Federal Salary Council (FSC) continues its work on the locality pay system, which aims to narrow the pay gap in specific high-cost-of-living areas. The FSC’s recommendations are independent of the President's final pay decision but set the stage for future adjustments. [cite: 6 from step 1, 9 from step 2]

Federal Salary Council (FSC) Recommendations for 2026

For the 2026 pay cycle, the FSC recommended the establishment of 11 new locality pay areas. If Congress or a future administration were to approve these areas, employees in these regions would eventually receive a higher locality adjustment on top of the base pay. The new recommended areas include: [cite: 6 from step 1]

  • Alexandria, LA
  • Greensboro-Winston-Salem-High Point, NC
  • Johnson City-Kingsport-Bristol, TN-VA
  • Lansing-East Lansing, MI
  • Lincoln-Beatrice, NE
  • Napa, CA
  • Palm Bay-Melbourne-Titusville, FL
  • Pensacola-Ferry Pass-Brent, FL
  • Reading-Berks, PA
  • San Luis Obispo-Paso Robles, CA
  • Santa Fe-Española, NM

These recommendations are based on detailed data from the National Compensation Survey (NCS) and the Occupational Employment and Wage Statistics (OEWS), demonstrating where the greatest pay disparities exist. The inclusion of these new areas is a key step toward improving pay retention and recruitment in specific regional markets. [cite: 9 from step 2]

Related Federal Compensation Entities

It is important to note that other federal compensation, such as for military retirees and disabled veterans, is calculated differently, typically using the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers (CPI-W). For 2026, the Cost-of-Living Adjustment (COLA) for these groups is projected to be around 2.8%, a separate figure from the civilian GS raise. [cite: 7 from step 1]

Global Government Pay Raise Projections for 2026

The pay raise debate is not unique to the United States. Public sector employees in other major economies are also facing varying projections for 2026, with some seeing more concrete figures than their US counterparts.

Australia: A Concrete 3.4% Increase

The Australian Public Service (APS) has a much clearer, contractually agreed-upon pay increase for 2026. The Department of the Treasury's Enterprise Agreement, for example, specifies a pay rise schedule: [cite: 18 from step 1]

  • Pay Increase: 3.4%
  • Effective Date: From the first full pay period on or after March 1, 2026 (specifically, March 12, 2026, for the Treasury). [cite: 18 from step 1]

This specific figure provides certainty for Australian government workers, contrasting sharply with the political uncertainty in the US. The Australian government has generally been working toward above-inflation pay rises for its workers in recent years. [cite: 21 from step 1]

Canada: Following the Private Sector Trend at 3.1%–3.3%

In Canada, the federal public service pay increases are often negotiated through collective bargaining, but they are heavily influenced by the broader economic climate. [cite: 24 from step 1]

  • Projected Average: Canadian organizations generally are projecting average base salary increases of between 3.1% and 3.3% for 2026. [cite: 14, 15, 16 from step 1]
  • Context: This represents a modest slowdown from previous years as cost pressures ease, but the federal government typically aligns with or slightly adjusts these private-sector trends in its collective agreements. [cite: 16 from step 1]

United Kingdom: Tighter Control with a 2.5% Cap

The UK public sector pay review process involves various independent Pay Review Bodies (PRBs) which make recommendations to the government. For the 2026-27 pay round, the government has signaled a more constrained approach: [cite: 10 from step 1]

  • Senior Civil Service Projection: The Cabinet Office has submitted evidence suggesting that the senior civil service pay rise should be capped at 2.5% or less. [cite: 9 from step 1]
  • General Trend: This is slightly below the median expected pay award of around 3% projected for the broader UK market in 2026, indicating a continued effort to control public sector spending. [cite: 12, 13 from step 1]

The Future Outlook for Government Compensation

The 2026 pay raise figures across the globe underscore a fundamental tension: the need to attract and retain skilled employees in a competitive labor market versus the political imperative to manage national budgets and fiscal responsibility. The US federal government’s decision to finalize a 1% raise, despite a statutory recommendation of 3.3%, highlights the continuing challenge of addressing the pay gap for General Schedule employees. For federal workers, the focus now shifts to the 2027 cycle and whether future administrations will allow the ECI-based statutory increase to take effect or if the trend of low alternative pay plans will persist.

Topical entities to monitor for future updates include the Bureau of Labor Statistics (BLS) reports on the Employment Cost Index (ECI), the annual report of the Federal Salary Council, and the Congressional budget proposals for the upcoming fiscal years.

The Government Raise Shock: Why the 3.3% Federal Pay Projection for 2026 Was Slashed to 1%
What is the government raise for 2026?
What is the government raise for 2026?

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