President Trump has told Congress that most of the government’s roughly two million civilian employees will get no base or locality pay increase in January 2027, even as junior members of the armed forces are in line for raises as large as 7 percent. The determination came in a letter the president is required to send each year when he wants to override the pay adjustment that would otherwise take effect automatically under federal law. For federal workers approaching retirement, the freeze matters beyond next year’s paycheck, since salary in an employee’s final working years helps set the pension that follows. The same letter also carves out a smaller raise for law enforcement personnel, underscoring how unevenly the 2027 pay picture is shaping up across the federal workforce.
The Alternative Pay Plan That Overrides Automatic Locality Pay
Federal law sets an annual formula for adjusting General Schedule pay, combining an across-the-board base increase with locality pay tied to the cost of labor in each region. A president can override that formula by transmitting an “alternative pay plan” letter to Congress citing a national emergency or serious economic conditions. Trump did exactly that on August 26, 2026, in a letter to House Speaker Mike Johnson stating that “base pay and locality pay for civilian Federal employees will not change from the 2026 rates.”
The letter puts a dollar figure on what the freeze avoids. Without an alternative plan, locality pay for the civilian workforce would have risen by an average of 20.6 percent starting in January, on top of a 3.1 percent across-the-board base increase, a combination the letter estimates would have cost $26 billion in its first year alone. Trump’s letter blames lingering inflation pressure for the decision to hold civilian pay flat for a second consecutive alternative-plan cycle.
That “second consecutive” framing is not an exaggeration. Civilian employees already went through 2026 with locality pay percentages held flat at 2025 levels and just a 1.0 percent across-the-board raise, under a separate alternative pay plan the president issued in August 2025, according to a Federal Register notice OPM published in February 2026. That notice also spells out how locality pay works day to day: General Schedule employees in the 58 designated locality pay areas receive an add-on ranging from 17.06 percent in the lowest-cost areas to 46.34 percent in the highest, layered on top of base pay before any freeze or raise is applied. The same 2026 notice shows the identical 1.0 percent figure applied to the Senior Executive Service pay range and to administrative law judges, pay systems that are not authorized to receive locality payments at all, meaning even the government’s most senior career managers saw only a token adjustment heading into a year in which base civilian pay is now set to move by nothing.
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Junior Troops Get Up to 7 Percent, Officers Get Less
Buried in the same letter is a tiered pay increase for the armed forces that runs well ahead of the civilian freeze. Citing his authority under 37 U.S.C. 1009(e), Trump set the 2027 monthly basic pay increase at 7.0 percent for grades E1 through E5, 6.0 percent for E6 through O3, and 5.0 percent for O4 and above, effective January 1, 2027. FedSmith’s review of the letter notes the structure mirrors the administration’s earlier budget request, weighting the largest raises toward junior enlisted service members. Uniformed personnel who serve outside the traditional Armed Forces are set for a smaller 3.6 percent increase under a separate statutory formula.
Unlike the civilian freeze, which needs no further action to take effect, the military figures could still be revisited if Congress passes a full defense authorization bill with different numbers before the pay year begins. Lawmakers have historically let a president’s proposed military raise stand once it has been transmitted this way.
Law Enforcement Carved Out With a 3.8 Percent Raise
A third track applies to federal law enforcement personnel, who are set to receive a 3.8 percent raise for 2027, the same figure Trump directed for 2026. That increase runs through the Office of Personnel Management’s special rate authority rather than through the alternative pay plan itself, and OPM has not yet published which specific job categories will qualify. Federal News Network’s coverage of the announcement notes the approach follows the same pattern used the prior year, when law enforcement received the larger increase while most other civilian employees got a modest 1 percent raise.
What Happens Next, and Why It Matters Near Retirement
Congress can still enact different pay figures before the calendar turns, and if it does, that legislation would override the alternative plan. In practice, lawmakers have let the president’s numbers become final by staying silent through the end of the year, with the actual 2027 pay tables set by executive order in December. For employees under the Federal Employees Retirement System or the older Civil Service Retirement System, a frozen final-year salary can matter because pensions are calculated from an employee’s highest three consecutive years of pay. A flat 2027 means that year contributes no growth to that average for anyone retiring soon after.
It is worth separating this freeze from the cost-of-living adjustment that flows to Social Security recipients and federal annuitants each year. That COLA is calculated automatically from the Consumer Price Index for Urban Wage Earners and Clerical Workers and is not affected by the president’s pay letter; it will be announced in October once third-quarter inflation data are finalized. The pay freeze applies only to current employees’ salaries, not to benefits already being paid to retirees.
This article was produced with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
