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As a payband associate, you may have noticed that multiplying your base hourly rate by 40 and then by 52 results in a different number than your base annual rate (BAR).  This article explains why 2087 hours a year is used to compute your BAR rather than 2080 (40*52).

Fact Sheet: Computing Hourly Rates of Pay Using the 2,087-Hour Divisor

Description

Hourly and biweekly rates of pay for most Federal civilian employees are computed as required by 5 U.S.C. 5504(b).

• Hourly rates of basic pay are computed by dividing an employee's annual rate of basic pay by 2,087 hours. Rates must be rounded to the nearest cent, counting one-half cent and over as the next higher cent (e.g., round \$18.845 to \$18.85).

• Biweekly rates of basic pay are computed by multiplying an employee's hourly rate of basic pay by 80 hours.

Covered Employees

The 2,087-hour divisor must be used for almost all civilian Federal employees in an executive agency, including employees under the General Schedule (GS), and most other employees, unless excluded by law. (See "Excluded Employees," below)

Although excluded by the premium pay definition of employee in 5 U.S.C. 5541(2), the following employees are covered by the 2,087-hour divisor: the head of an executive agency, the head of a military department, a Foreign Service officer, a member of the Senior Foreign Service, a member of the Senior Executive Service, and a member of the Federal Bureau of Investigation and Drug Enforcement Administration Senior Executive Service.

Excluded Employees

The 2,087-hour divisor may not be used for an employee or individual excluded from the definition of "employee" for premium pay purposes in 5 U.S.C. 5541(2), except those listed as covered above.

In addition, firefighters covered by 5 U.S.C. 5545b are subject to special rules for computing hourly rates and overtime pay. See 5 CFR part 550, subpart M. Also, rates of pay for certain Department of Veterans Affairs employees paid under title 38, United States Code, are computed using a 2,080 hourly divisor.

Example

In 2011, the annual rate of basic pay of a GS-13, step 1, employee in the Washington, DC, locality pay area is \$89,033. The employee's payroll calendar has 26 pay dates.

The employee's hourly rate of basic pay is \$42.66 (\$89,033/2,087 hours).

The employee's biweekly rate of basic pay is \$3,412.80 (\$42.66 x 80 hours).

The pay the employee will actually receive is \$88,733 (\$3,412.80 x 26 pay dates).

If calendar year 2011 had 27 pay dates (see 26 or 27 Pay Dates below), a GS-13, step 1, employee in the DC locality pay area would actually receive \$92,146 (\$3,412.80 x 27 pay dates).

Background

Until 1984, an hourly rate of basic pay was computed by dividing the employee's annual rate of basic pay by 2,080 hours (the number of hours in 52 workweeks of 40 hours) and rounding to the nearest cent. For a regular full-time employee, the hourly rate was then multiplied by 80 to determine the biweekly gross pay. This formula presumes a calendar year consisting of exactly 52 weeks or 364 days. However, a calendar year actually consists of either 365 or 366 days. Thus, a calendar year may have more paid workdays than a 52-week year.

A General Accounting Office study published in 1981 demonstrated that over a 28-year period (the period of time it takes for the calendar to repeat itself) there are, on average, 2,087 work hours per calendar year. This average results from the fact that there are usually 4 years with 262 workdays (2,096 hours), 17 years with 261 workdays (2,088 hours), and 7 years with 260 workdays (2,080 hours). The 2,087 divisor is derived from the following formula: (2,096 hours*4 years) + (2,088 hours*17 years) + (2,080 hours*7 years) / 28 years = 2,087.143 hours. Using 2,087 as the average number of work hours in a calendar year reasonably accommodates the year-to-year fluctuations in work hours.

The Omnibus Budget Reconciliation Act of 1982 (Public Law 97-253, Sept. 8, 1982) temporarily changed the divisor for computing the hourly rate from 2,080 work hours to 2,087 work hours in fiscal years 1984 and 1985. The Consolidated Omnibus Budget Reconciliation Act of 1985 (Public Law 99-272, April 7, 1986) made this change permanent by amending 5 U.S.C. 5504(b).

26 or 27 Pay Dates

There are usually 26 pay dates each year. Over a period of several years, employees can expect to experience 27 pay days in a calendar year. Therefore, employees can actually receive more or less than their annual rate of basic pay in a given calendar year.

Most Federal employees are serviced by one of the following four major payroll providers - General Service Administration (GSA), Defense Finance and Accounting Service (DFAS - Department of Defense), National Business Center (NBC - Department of the Interior), and the National Finance Center (NFC - Department of Agriculture). These payroll providers have the same pay period start and end dates, but have different pay dates and use different pay period numbering systems in their payroll calendars. Employees should contact their human resources office to obtain the payroll calendar applicable to them.

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