Salary Squeeze

Pay raises are usually happy events, but there were some quiet moans across Washington when new government salary scales were published in January.

For the first time, Washington area federal employees at the top of the government-wide salary scale, the General Schedule, had hit the "pay cap."

But the number affected was not known until late last month when the Congressional Research Service pulled together data for a report: 6,080 GS employees in the Washington area were at the cap.

That may not seem like a lot, but only 824 employees across the nation were capped before the 2008 raise. What had been an issue for GS employees in San Francisco, Houston and other cities is now an issue in Washington.

Don't expect any public protests, just private grumbling. That is because the cap is set at $149,000 this year, and longtime federal employees know they can't expect much sympathy when they earn that much.

Still, there are consequences when employees hit the cap. Over time, their salaries become substantially lower than what they would have been, and their pensions, which are partially based on salary, will be lower.

For example, because of the cap, San Francisco federal employees at the top of the GS scale -- the first to hit the pay ceiling in 2003 -- have forgone nearly $49,000 in salary since then, the report said.

In addition, these employees' annual Civil Service Retirement System pension will be $7,068 less than it would have been without the cap.

When employees have their pay capped, they "may be more likely to retire as soon as they reach retirement eligibility -- possibly exacerbating the 'retirement tsunami' or 'brain drain' that has been viewed as a concern for the federal workforce," the report said.

Almost all companies and organizations, of course, limit salaries, based on employee roles and responsibilities. But the origins of the government's pay curbs are rooted in law, and some have not been updated to reflect how work and compensation practices have evolved in recent decades.

At least four laws come together to create the pay cap.

The 1949 Classification Act created the General Schedule, which has 15 grades, reflecting the difficulty of the work, and 10 steps within each grade. Employees advance through the GS system based on longevity and job performance. The top of the scale is GS-15, step 10.