The 2021 military pay increase is officially 3% now that the FY2021 National Defense Authorization Act has passed.
See the 2021 military pay charts with a 3 percent increase or use the military pay calculator.
“In support of the Department’s effort to continue to build a bigger more lethal and ready force, the FY 2021 President’s Budget proposes a 3 percent increase in military basic pay. This builds on last year’s 3.1 percent increase and is key to sustaining the force and building on our readiness gains.” Overview – FY 2021 Defense Budget
Typical Next Steps for a Military Pay Increase:
- The DOD Fiscal Year 2021 Budget Proposal is released: Released on February 10, 2020
- Spring/Summer – House & Senate Armed Appropriations Committees work defense budget
- Fall/Winter – House & Senate pass the defense budget
- Fall/Winter – The defense budget is signed into law by the President
By law, the NDAA should be enacted before the start of the next fiscal year on October 1, but the deadline is often missed, and Congress passes Continuing Resolutions (CR) to keep the military operating under the previous year’s budget.
How Annual Military Basic Pay Raises Are Calculated
Under current law, military pay raises are by default, set to equal the percentage change in the U.S. Employment Cost Index (ECI). It is a formula for an automatic annual increase in Basic Pay that is indexed to the annual increase in the ECI for Private Industry Workers. However, the President and Congress can enact increases that are above the ECI. The President, by law Title 37, Chapter 19, Section 1009, has the authority to specify an alternative pay adjustment that supersedes the automatic adjustment.
Basic pay is the largest component of military service members’ cash compensation. Non-taxable allowances for housing and food make up most of the remainder of that compensation.
ECI Increase for 2021
The military Basic Pay raise under the automatic statutory ECI formula is 3.0 percent. This is based on the ECI formula for wages and salaries that increased 3.0 percent for the 12-month period ending in September 2019. Again, the president, Congress and the Defense Department are not strictly bound by the ECI.
Actual increases in Basic Pay can be different, depending on presidential or congressional action. Typically the ECI plays a major factor in the final Basic Pay increase. For example, the FY2021 NDAA requested a 3.0% increase in basic pay which matched the automatic ECI statutory formula of 3.0%.
About the Economic Cost Index (ECI)
The Employment Cost Index (ECI) is a quarterly economic series that details the growth of total employee compensation. The index is prepared by the Bureau of Labor Statistics (BLS), a unit of the United States Department of Labor (DOL). It is based on a survey of employer payrolls conducted by the BLS in the final month of each quarter and measures the change in the cost of labor, free from the influence of employment shifts among occupations and industries.
ECI measures annual and quarterly percentage increases for three different populations — “private industry workers,” “state and local government workers” and a combination of those two called “civilian workers.”
ECI differs from the Consumer Price Index (CPI-W), which is used to determine pay increases for social security, retired military, and VA benefits recipients via Cost of Living Adjustments (COLA). CPI-W is tied to inflation.
Historical Military Pay Raises by Year
|Year||Military Pay Raise %||Year||Military Pay Raise %|
|1996||2.40%||1965||E: 11% O:6%|
|1995||2.60%||1964||2.5% - 8.5%|
* 2002, 2003, 2004, and 2007 are the average percentage raise as military pay raises differed for various military pay grades.
2021 military pay increases are for all branches of the U.S. Armed Forces; Air Force, Army, Coast Guard, Marines, Navy, Space Force and Reserve forces where applicable.