Federal Wage System

The Federal Wage System (FWS) in the United States was developed to make the pay of federal blue-collar workers comparable to prevailing private sector rates in each local wage area. The FWS is a partnership worked out between the Office of Personnel Management (OPM), other Federal agencies, and labor organizations.

Before the FWS, there was no central authority to establish wage equity for Federal trade, craft, and laboring employees. In 1965, President Lyndon B. Johnson ordered the former Civil Service Commission to work with Federal agencies and labor organizations to study the different agency systems and combine them into a single wage system that would be sensible and just. President Johnson called for common job-grading standards and wage policies and practices that would ensure interagency equity in wage rates. He established two basic principles for these policies and practices: Wages will be set according to local prevailing rates, and; there will be equal pay for equal work and pay distinctions in keeping with work distinctions.

Congress established the FWS by law in 1972. It created a joint labor-management Federal Prevailing Rate Advisory Committee (FPRAC) with an independent Chairman. Agencies and labor unions are members of the Committee. FPRAC studies all matters pertaining to prevailing rate determinations and advises the Director of the OPM on appropriate pay policies for FWS employees.

The goal of the system is to pay employees according to local prevailing rates. The regular pay plan covers most trade, craft, and laboring employees in the executive branch. The FWS does not cover United States Postal Service employees, legislative branch employees, or employees of private sector contracting firms. Special pay plans cover certain employees in special circumstances. The OPM authorizes special pay plans when unusual labor market conditions seriously handicap agencies in recruiting and retaining qualified employees.

OPM prescribes basic policies and procedures to ensure uniform pay-setting. OPM specifies procedures for agencies to design and conduct wage surveys, to construct wage schedules, to grade levels of work, and to administer basic and premium pay for employees.

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