Fedweek

The annual COLA announcement always sets off a round of confusion in the federal community involving raises and COLAs, in part because many employees refer to their raises as COLAs. The raise and the COLA do not affect each other. The COLA goes to those who are retired, and is an automatic adjustment linked to the consumer price index for urban wage earners. A raise goes to active employees and is determined through the congressional budget process. For January 2015, a 1 percent across-the-board raise, with no locality component, is in progress but is not yet finalized. Under federal pay law, the raise is supposed to be linked to the employment cost index, which is a measure of private sector wage growth—not living costs—and that is based on a different measuring period than the CPI figure used for the COLA. That formula has not been followed for years, though. The 1 percent figure would however continue the momentum for paying raises annually again after the 1 percent raise in January of this year broke a three-year salary rate freeze.