The federal wage system — sometimes called the wage grade or prevailing rate system — is a pay-setting system covering federal employees paid by the hour. The aim is to make sure that federal trade, craft, and laboring employees in a local wage area who do the same kind of work get the same rate of pay. The common wage schedules consist of 15 grades, covering most nonsupervisory employees. Schedules for supervisors and leaders are based on the nonsupervisory schedules, but are separate from them.

In each pay grade, there are five step rates—each 4 percent apart—with the second step based on the going rate in private industry. Raises are paid at differing times of the government’s fiscal year, depending on the local pay study cycle.

The wage system is based on “comparability with local prevailing rates,” which means that pay is based on what private industry is paying for similar work levels in a local wage area. Wage system employees are paid the full prevailing rate (100 percent) at step 2 of their grade. At step 5, the highest step, wage system employees may be paid 12 percent above the prevailing rate. Out-of-area wage data is used for local wage surveys when large numbers of wage system employees are employed in specialized occupations but there are few comparable jobs in local private sector companies.

However, due to annual caps on blue-collar raises, those increases are limited to the pay adjustments received by GS employees in the same location. The raises are paid at differing times of the year, varying by locality.

Wage schedules are at

Federal Wage System: Within-grade increases

Wage grade employees performing acceptably advance to the second step after six months, to the third after another 18 months and to the fourth and fifth after another two years each at their prior steps.