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The 2007 Military Pay Raises

2.2% Pay Raise Effective January 2007

American Forces Press Service | Jim Garamone
October 24, 2006

WASHINGTON – With the 2.2 percent across-the-board pay raise that is part of the Fiscal 2007 National Defense Authorization Act, the Defense Department will reach its goal to bring military basic pay to the 70th percentile when compared to civilians with comparable education and training, a top DoD compensation official said.

The goal grew out of the 9th Quadrennial Review of Military Compensation released in 2002, which concluded that basic pay did not adequately compensate an increasingly educated military force.

Virginia Penrod, DoD’s director of military compensation, said the 2.2 percent across-the-board pay raise – which kicks in Jan. 1, matches the employment cost index for the year.

ECI measures the growth in private-sector wages. Current law ties any military pay raise to the index.

Also helping DoD reach its goal, she said, is targeted pay raises for service members in grades E-5 to E-7 and warrant officers that go into effect April 1.

But compensation is more than simply basic pay. While service members have seen a basic pay increase since 2001 of roughly 28 percent, basic allowance for housing has risen over 50 percent, Penrod said. “As far as compensation (is concerned), we think we have it right,” she said in an interview with the Pentagon Channel and American Forces Press Service.

When officials talk about compensation, they include basic allowance for housing, basic allowance for subsistence, basic pay and the tax advantage for not having allowances taxed.

DoD has more than 20 different types of bonuses, and the act enables the department to pay these bonuses through the fiscal year. It also puts some changes into effect for those bonuses.

For example, the act has increased the amount of the bonus paid to service members who transfer between armed forces. An airman transferring to the Army is now eligible to receive a $10,000 bonus after serving three years in the new service. Previously, Congress capped that bonus at $2,500.

Penrod said that bonus will be used to get sailors and airmen to sign up for the Army. The act also raises the ceiling of debt DoD is allowed to cancel.

“Soldiers serving in Iraq, for example, receive hostile fire pay, family separation pay and hardship pay,” Penrod said. “If the service member is injured and medevacced to Germany, sometimes mistakes happen and the pays are not cancelled. The soldier now has a debt.”

If later, as the Defense Finance and Accounting Service is processing the service member for medical separation or retirement, that debt shows up, she explained, officials can now waive up to $10,000 of debt incurred through no fault of the service member.

The act also extends the military pay table to 40 years. This is part of Defense Secretary Donald H. Rumsfeld’s military transformation effort.

Senior officers, warrant officers and noncommissioned officers are a valuable trained resource to the department, Penrod said, and this gives selected service members an incentive to remain in the military longer.

The pay table has regular longevity increases from 30 to 40 years of service, and a service member retiring after 40 years of service would receive 100 percent of basic pay.

Penrod said the 10th Quadrennial Review of Military Compensation – meeting now – will look at ways to simplify DoD pays. “We have over 60 special incentive pays , and it’s difficult to keep up with,” she said.

“We hope to simplify our pays and put them in basically five categories; it would make it easier to manage the pays.”