Employees who wish to have certain types of pay added to their paychecks should be aware of the Premium Pay caps that OPM establishes on an annual basis. If the biweekly amount exceeds the set cap, then any premium amounts above that threshold will not be paid. As these types of wages are determined by each individual agency and can be situational, the premium pay is usually structured with respect to the biweekly Premium Pay cap set by OPM. Depending on the circumstances, some agencies may get permission to apply an annual premium pay cap as opposed to a biweekly one.
To see how the ‘biweekly’ cap works, the 2020 cap for those in the DC-Maryland-Virginia area (which is $170,277.20) can be used as an example. The limit is determined by the GS-15, Step 10 Locality Rate and the Level V of the Executive Schedule pay rate- the greater of the two is that locality’s cap. So for the DC locality, the biweekly number is found by dividing the annual salary by 2087 (the number of hours in a calendar year of work):
$170,277.20 / 2087 = $81.59 per hour
Then multiply the answer by 80 (number of hours in two weeks of work):
$81.59 x 80 = $6,527.20 biweekly
So, for this locality at least, a federal employee’s biweekly pay cannot include premium pay that causes their gross two-week pay to exceed $6,527.20.
It is important to remember that some workers are exempt from the limits, or don’t qualify for premium pay based on the nature of their job or agency. For instance, Firefighters who regularly work 106 hours over two weeks are covered by special salary rules.
Types of Premium Pay Include: Overtime, Compensatory Time Off, Night Pay, Sunday premium pay, Holiday premium pay, Standby Duty Pay, Availability pay (for Federal Law Enforcement Officers). A full list can be found here
The 2020 Premium pay cap average, across 54 localities is $168,300- about $1,925 less than the nation’s capital. Last year’s average was $163,625 meaning the cap was lifted about 2.85%. There has been an increase of 7.84% since 2015’s average of $156,070. DC’s locality cap increased 5.8% from 2019’s limit of $165,940 and 7.66% over 5 years as 2015’s cap was $158,165.
Until Next Time,
**Written by Benjamin Derge, Financial Planner. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
2020 Premium Pay Caps