**GAO-11-772R**                      Published: Jun 30, 2011. Publicly Released: Jun 30, 2011.                  

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## Highlights

The Federal Employees Pay Comparability Act (FEPCA) of 1990 established locality pay to achieve pay comparability between federal and nonfederal jobs within the United States. Because FEPCA established pay localities only for areas within the United States, federal employees permanently stationed overseas, including members of the Foreign Service, did not receive locality pay. As the Washington, D.C., locality rate grew to over 24 percent in 2010, the pay gap between federal employees who receive locality pay and those who do not widened considerably. To close this gap, the fiscal year 2009 Supplemental Appropriations Act granted the Department of State (State) temporary authority to provide locality pay at the Washington, D.C., rate, also known as Overseas Comparability Pay, to Foreign Service personnel posted overseas. State is implementing this pay in three phases. Currently, Foreign Service personnel serving overseas receive 16.52 percent comparability pay, approximately twothirds of the Washington, D.C., locality rate. State had planned to implement the third and final phase of comparability pay, raising it to 24.22 percent, in August 2011. However, these plans have been delayed by the administration's freeze on federal salaries and the passage of the Department of Defense and Full Year Continuing Appropriations Act for fiscal year 2011, which prohibited State from using funds to implement the final phase. In December 2010, the National Commission of Fiscal Responsibility and Reform identified comparability pay as a potential source of cost savings. Without a continuation of authority, State cannot continue to provide comparability pay with funds appropriated after fiscal year 2011. State estimates that the cost of implementing all three phases of comparability pay for State would be $302 million in fiscal year 2012. The Congressional Budget Office has estimated that implementing comparability pay for all foreign affairs agencies would cost about $2 billion through fiscal year 2015. In a previous report, we found that State faces challenges filling staffing gaps at hardship posts overseas and cited State officials' claims that the lack of comparability pay may be a deterrent to serving at overseas posts. Congress asked us to review State's request for permanent authority to grant overseas comparability pay to certain members of the Foreign Service posted overseas to inform the fiscal year 2012 State Department authorization process. On May 27, 2011, we provided a briefing to Congressional staff on our preliminary findings. We also agreed to provide the information presented in the briefing, updated with additional material, which describes (1) State's rationale for providing overseas comparability pay, (2) how the provision of overseas comparability pay affects Foreign Service personnel pay and benefits, and (3) how the pay and benefits of Foreign Service personnel posted overseas compare with those of other civilian agency staff overseas.

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## Topics

Human Capital

Comparative analysisCompensationDifferential payEmployee incentivesEmployee retentionEmployeesFederal agenciesFederal employeesstate relationsPayPay equityPersonnel recruitingRetirementRetirement benefitsSalary increasesSocial security benefitsWorkers compensationPermanent duty stationPolicies and procedures