5 USC 5305: Special Pay Authority, Caps, and Locality Pay

The special pay authority under 5 U.S.C. 5305 lets the Office of Personnel Management set higher minimum pay rates for General Schedule positions when regular GS salaries aren’t enough to recruit or retain qualified workers. These “special rates” apply to specific occupations, grades, and locations, and they can go up to 30 percent above the normal grade maximum, with a hard ceiling at Level IV of the Executive Schedule ($197,200 in 2026).¹ The statute matters most to federal workers in fields like information technology, healthcare, and engineering, where the federal-private pay gap is wide enough to make hiring difficult.

What the Statute Authorizes

Section 5305 gives OPM broad discretion to raise minimum pay whenever the government’s ability to hire or keep employees in one or more occupations is, or is likely to become, significantly hampered. OPM doesn’t have to wait until an agency is already losing staff; the “likely to become” language lets OPM act before the problem hits.¹

Four situations can trigger a special rate:

Non-federal employers in the same area or occupation pay significantly more than the government.
The duty station is geographically isolated enough to make recruitment difficult.
The work itself is undesirable or hazardous, including exposure to toxic substances or other occupational hazards.
Any other circumstance OPM considers appropriate.

That fourth category is deliberately open. It lets OPM address workforce problems Congress didn’t specifically anticipate when it wrote the statute.¹

Who Gets a Special Rate

Special rates under 5 U.S.C. 5305 apply to employees paid under the General Schedule. OPM publishes numbered Special Rate Tables that spell out which occupational series, grades, and geographic areas are covered. Table 999B, for example, covers IT management specialists (series 2210), computer engineers (series 0854), and computer science specialists (series 1550) across essentially every federal agency and locality pay area.²

Coverage is automatic. If your position matches the occupation, grade, and location on a table, the agency must pay you that special rate. You don’t apply for it. The only way it doesn’t apply is if the agency has affirmatively opted out by notifying OPM in writing.³

Some tables are agency-specific, covering only positions at a single agency such as the Indian Health Service or the Department of Veterans Affairs. Others, like Table 999B, span all agencies. To check your coverage, look up the current special rate tables on OPM’s website by agency, occupation, or location.⁴

When an Agency Opts Out

An authorized agency official can exclude a category of employees from a proposed or existing special rate schedule by sending written notice to OPM identifying the excluded categories. For a new schedule, the notice must arrive before the effective date. For an existing schedule, coverage ends on the first day of the first pay period after OPM receives the notice.³

How High Special Rates Can Go

Two hard ceilings apply:

The special-rate minimum for a grade cannot exceed the maximum GS rate for that grade (before locality) by more than 30 percent.
No special rate can exceed Executive Schedule Level IV, which is $197,200 in 2026.

Both limits apply at the same time. Whichever produces the lower number wins.¹

There’s also a yearly cap on total compensation. For most executive branch employees, aggregate pay in a calendar year — basic pay (including any special rate supplement), premium pay, incentive awards, recruitment and retention incentives, and similar payments — cannot exceed the rate for Executive Schedule Level I at year end. In 2026, that ceiling is $253,100.⁵ FLSA overtime, severance pay, and lump-sum payments for unused annual leave at separation don’t count toward that number.

Special Rate vs. Locality Pay

This is the part that confuses most people. If you’re entitled to both a special rate and a locality-adjusted rate, you don’t get both stacked. You get whichever produces the higher basic pay.⁶

Locality pay percentages vary by area, so the same special rate table can produce different results depending on where you work. In a high-cost city where locality pay runs 35 percent or more, the locality rate at some or all steps may exceed the special rate. In a lower-cost area, the special rate wins. OPM leaves cells blank on a special rate table wherever the locality rate is higher in every covered location, which is why you’ll sometimes see gaps in the tables.⁶

To find what you should actually be paid, look up both your special rate table and your locality pay table for your duty station at your grade and step. The higher number is your payable rate.

On annual adjustments, special rate employees receive the across-the-board General Schedule increase, and then receive either their special rate adjustment or the locality component of the raise, whichever is higher. The 2026 special rate tables incorporate the 1.0 percent January 2026 GS increase.²

Effect on Retirement, Overtime, and Promotion

Retirement

Special rates count as basic pay for retirement. Under FERS, your annuity is based on your “high-3” average, which is the highest average basic pay you earned during any three consecutive years of service. Because your special rate is part of basic pay rather than a bonus, years in a special rate position can meaningfully raise your high-3 and your annuity.⁷

FLSA Overtime

For employees covered by the Fair Labor Standards Act, the special rate supplement is included in the “total remuneration” used to calculate the hourly regular rate. Overtime is computed on the special rate, not the lower GS rate. It’s a real benefit that gets overlooked when people compare a special rate job to a job in a higher-locality area.⁸

Promotion

The two-step promotion rule uses the highest applicable rate on either side of the promotion, so a special rate factors into your new pay. When you move from a special rate position to a non-special-rate position, or the reverse, the agency compares the standard method with an alternate method and pays you under whichever gives the higher result. Losing special rate coverage on promotion doesn’t automatically mean a pay cut; the promotion rules are designed to prevent that.⁹

If Your Special Rate Is Cut or You Transfer

OPM can review any special rate schedule at any time and increase, decrease, or discontinue it. A cooling labor market or a shrinking gap with private-sector pay can lead to a reduction.¹⁰

If a schedule is reduced or discontinued and the change would lower your basic pay, you’re entitled to mandatory pay retention. Pay retention preserves your former rate as a “retained rate” that generally continues until your position’s rate range catches up to or exceeds it, you have a break in service of one or more workdays, or you decline a reasonable offer of a position that pays at or above your retained rate.¹¹

Pay retention does not apply if the reduction comes from a statutory cut to General Schedule rates overall, if you’re serving in a temporary or term appointment, if you voluntarily requested the reduction, or if you were reduced in grade for personal cause.¹¹

A geographic transfer is treated separately. When you move to a new duty station where different pay schedules apply, your agency performs a geographic conversion before any other pay action, mapping your step to the highest rate range that would apply to your old position at the new worksite. A reduction that results solely from this geographic conversion does not by itself trigger pay retention.¹²

If You Think You’re Being Paid Wrong

Start with your agency’s HR office. Most special rate problems come from coding mistakes: a position classified under the wrong occupational series, a duty station that wasn’t updated, or an opt-out affected employees didn’t know about. HR can usually fix these quickly.

If the mistake amounts to an unjustified denial of pay you were entitled to, the Back Pay Act may apply. Under 5 U.S.C. 5596, an employee denied pay because of an unjustified or unwarranted personnel action, including a failure to take an action or confer a benefit, can recover the difference with interest. Claims can reach back up to six years from the date of a timely appeal or administrative determination.¹³

Where the loss of a special rate produces a reduction in pay — say, your agency removes your position category from a schedule — that reduction can qualify as an adverse action appealable to the Merit Systems Protection Board, because MSPB covers reductions in pay under 5 U.S.C. 7512.¹⁴ MSPB’s jurisdiction over pay classification and special rate eligibility questions is limited, though, and not every disagreement about whether a position should be covered will qualify as an appealable action.

Agencies themselves have no formal way to override an OPM denial of a special rate request. They can submit additional data and ask OPM to reconsider, but OPM holds final authority over establishing, adjusting, or discontinuing a schedule. Judicial review under the Administrative Procedure Act is theoretically available, but court challenges to OPM’s special rate decisions are exceedingly rare.

1
Office of the Law Revision Counsel. 5 USC 5305 – Special Pay Authority
2
U.S. Office of Personnel Management. Special Rate Table Number 999B
3
eCFR. 5 CFR 530.303 – Coverage
4
U.S. Office of Personnel Management. Special Rates – OPM.gov
5
eCFR. 5 CFR Part 530 Subpart B – Aggregate Limitation on Pay
6
U.S. Office of Personnel Management. Special Rates – Important Information Regarding the Relationship Between Special Rates and Locality Rates
7
U.S. Office of Personnel Management. Computation
8
U.S. Office of Personnel Management. How to Compute FLSA Overtime Pay
9
eCFR. 5 CFR 531.214 – Setting Pay Upon Promotion
10
eCFR. 5 CFR 530.307 – OPM Review and Adjustment of Special Rate Schedules
11
eCFR. 5 CFR Part 536 – Grade and Pay Retention
12
eCFR. 5 CFR 536.303 – Geographic Conversion
13
eCFR. 5 CFR Part 550 Subpart H – Back Pay
14
Office of the Law Revision Counsel. 5 USC 7512 – Actions Covered