President Obama has extended his two-year pay freeze for federal employees until at least April of 2013, or until Congress passes a Fiscal Year 2013 federal budget.
With the government still operating under a continuing spending resolution, rather than an adopted budget, Obama sent a letter to congressional leaders stating, "Congress should maintain current pay rates during the period of the continuing resolution." That continuing resolution expires in April 2013, unless Congress passes a full budget before then.
Had Obama not sent Congress his "alternative pay plan" extending the pay freeze, federal employees would have automatically received a pay increase based on private-sector salaries on October 1, 2012, the start of the government's 2013 fiscal year.
October 1, 2012 is also the legally mandated deadline for Congress to pass a budget, an event considered highly unlikely now due to the presidential election.
Once a budget is passed, or the continuing resolution expires next April, Obama told congressional leaders that he recommends federal employees get a 0.5% across-the-board pay raise, with locality-based pay bonuses to remain at 2012 levels.
"This decision will not materially affect the Federal Government's ability to attract and retain a well-qualified Federal workforce," wrote Obama.
While President Obama acknowledged in his letter that federal employees had already made "significant sacrifices" because of the pay freeze, "As our country continues to recover from serious economic conditions affecting the general welfare, however, we must maintain efforts to keep our Nation on a sustainable fiscal course. This is an effort that continues to require tough choices and each of us to do our fair share."
Last week, the National Treasury Employees Union (NTEU), one of the largest unions representing federal employees, stated that federal employees had already contributed $75 billion over the last 10 years towards deficit reduction and economic recovery through the two-year pay freeze and increases in employee retirement contributions for new employees.