Military Pay: Key Questions and Answers
Lawrence Kapp
Specialist in Military Manpower Policy
Barbara Salazar Torreon
Information Research Specialist
January 20, 2015
Congressional Research Service
7-5700
www.crs.gov
RL33446
Military Pay: Key Questions and Answers
Summary
From the earliest days of the republic, America’s armed forces have been compensated for their
services by the federal government. While the original pay structure was fairly simple, over time
a more complex system of compensation has evolved. Today’s military compensation includes
cash payments such as basic pay, special and incentive pays, and various allowances.
Servicemembers also receive non-cash benefits such as health care and access to commissaries
and recreational facilities, and may eventually qualify for deferred compensation in the form of
retired pay and other retirement benefits. This report provides an overview of military
compensation generally, but focuses on cash compensation for current servicemembers.
Since the advent of the all-volunteer force in 1973, Congress has used military pay and
allowances to improve recruiting, retention and the overall quality of the force. Congressional
interest in the sustaining the all-volunteer force during a time of sustained combat operations led
to substantial increases in compensation in the decade following the September 11th attacks. More
recently, concerns over government spending have generated congressional interest in slowing the
rate of growth in military compensation.
Some have raised concerns about the impact of personnel costs on the overall defense budget,
arguing that they decrease the amount of funds available for modernizing equipment and
sustaining readiness. Others argue that robust compensation is essential to maintaining a high-
quality force that is vigorous, well-trained, experienced, and able to function effectively in austere
and volatile environments. The availability of funding to prosecute wars in Iraq and Afghanistan
mitigated the pressure to trade-off personnel, readiness, and equipment costs, but the current
budgetary environment appears to have brought these trade-offs to the fore again.
The average cost to compensate an active duty servicemember—to include cash, benefits, and
contributions to retirement programs—is estimated at about $90,000- $100,000 per year, although
some estimates are higher (methodologies vary). However, gross compensation figures do not tell
the full story, as military compensation relative to civilian compensation is a key factor in an
individual’s decision to join or stay in the military. Thus, the issue of comparability between
military and civilian pay is an often-discussed topic. Some analysts and advocacy groups have
argued that a substantial “pay gap” has existed for decades —with military personnel earning less
than their civilian counterparts—although they generally concede that this gap is fairly small
today. Others argue that the methodology behind this “pay gap” is flawed and does not provide a
suitable estimate of pay comparability. Still others believe that military personnel, in general, are
better compensated than their civilian counterparts. This latter perspective has become more
prominent in the past few years. The Department of Defense takes a different approach to pay
comparability. The 9th Quadrennial Review of Military Compensation (QRMC), published in
2002, argued that compensation for servicemembers should be around the 70th percentile of
wages for civilian employees with similar education and experience. However, according to the
11th QRMC, published in 2012, it had reached the 83% level for officers and the 90% level for
enlisted personnel.
On February 1, the congressionally established Military Compensation and Retirement
Modernization Commission is due to deliver its report, which will likely include a variety of
recommendations for restructuring military compensation and adjusting compensation levels that
Congress may choose to consider.
Congressional Research Service
Military Pay: Key Questions and Answers
Contents
Introduction ...................................................................................................................................... 1
Key Questions and Answers ............................................................................................................ 1
1. How are military personnel compensated? ............................................................................ 1
2. What is Regular Military Compensation (RMC)? How much do Servicemembers
receive in RMC? ..................................................................................................................... 2
Regular Military Compensation (RMC) .............................................................................. 2
3. How Are Each Year’s Increases in Basic Pay, BAH, and BAS Computed? .......................... 8
Basic Pay: Increases Are Linked to Increases in the Employment Cost Index
(ECI)................................................................................................................................. 8
Basic Allowance for Housing: Increases are Linked to Increases in Housing Costs .......... 9
Basic Allowance for Subsistence: Increases are Linked to Increases in Food Costs ........ 11
4. What Have Been the Annual Percentage Increases in Active Duty Military Basic
Pay Since 1994? What Were Each Year’s Major Executive and Legislative Branch
Proposals and Actions on the Annual Percentage Increase in Military Basic Pay? .............. 11
5. What Is An “Adequate” Level of Military Pay? .................................................................. 13
6. Is There a “Pay Gap” Between Military and Civilian Pay? Do Military Personnel
Make More or Less Than Their Civilian Counterparts? ....................................................... 14
Measuring and Confirming a “Gap” ................................................................................. 15
Estimates of a Military-Civilian Pay Gap ......................................................................... 16
If There Is a Pay Gap, Does It Necessarily Matter? .......................................................... 17
7. What Additional Benefits Are Available For Military Personnel Serving in Iraq and
Afghanistan? ......................................................................................................................... 18
Hostile Fire/Imminent Danger Pay.................................................................................... 18
Hardship Duty Pay ............................................................................................................ 19
Family Separation Allowance ........................................................................................... 19
Per Diem ............................................................................................................................ 19
Combat Zone Tax Exclusion ............................................................................................. 19
Savings Deposit Program .................................................................................................. 20
8. What Benefits Are Available to the Survivors of Military Personnel Killed in Iraq
or Afghanistan?..................................................................................................................... 20
Tables
Table 1. Major Compensation Elements Provided to All Active Duty Personnel ........................... 3
Table 2. Average Regular Military Compensation for Selected Paygrades ..................................... 8
Contacts
Author Contact Information........................................................................................................... 21
Congressional Research Service
Military Pay: Key Questions and Answers
Introduction
The military compensation system is complex and includes an array of cash compensation
elements, non-cash compensation (benefits), deferred compensation (retirement pay and benefits),
and tax advantages. This report focuses primarily on the cash compensation provided to members
of the active component armed forces.1 Other CRS reports cover military retirement and health
care.2
Military compensation is a critical tool for sustaining recruiting, retention and the overall quality
of the force. Over the years of operations in Iraq and Afghanistan, particularly during times of
major combat operations, robust compensation has been an important mechanism by which
Congress helped the services, and particularly the Army, meet their recruiting and retention goals.
Today, the average cost to compensate an active duty servicemember—to include cash, benefits,
and contributions to retirement programs—is estimated at about $90,000- $100,000 per year,
although some estimates are higher (methodologies vary). As a result, some analysts believe that
the military compensation is now too high and is impeding efforts to modernize equipment and
sustain readiness, particularly given the budgetary limits imposed by the Budget Control Act of
2011 (BCA; P.L. 112-25). Others argue that robust compensation is essential to maintaining a
high-quality force that is vigorous, well-trained, experienced, and able to function effectively in
austere and volatile environments. The availability of additional funding to prosecute wars in Iraq
and Afghanistan mitigated the pressure to trade-off personnel and equipment costs for many
years, but the current budgetary environment appears to have brought these trade-offs to the fore
again.
Key Questions and Answers
1. How are military personnel compensated?
There are three main ways in which military personnel are compensated: cash compensation, non-
cash compensation, and deferred compensation.
• Cash compensation takes a variety of forms and includes basic pay, housing and
subsistence allowances, enlistment bonuses, skill proficiency pay, and additional
pay for particularly demanding or dangerous duty.
• Non-cash compensation includes various types of benefits such as medical and
dental care, government-provided housing, educational benefits, access to
1 Unless otherwise specified, the terms “member of the armed forces” or “servicemember” in this report refers to
members of the active component. Members of the reserve component personnel receive nearly identical compensation
when they are ordered to active duty for over 30 days, but are compensated somewhat differently when on active duty
for 30 days or less, and much differently when not on active duty. For more information on reserve component
compensation see CRS Report RL30802, Reserve Component Personnel Issues: Questions and Answers, by Lawrence
Kapp and Barbara Salazar Torreon.
2 See CRS Report RL34751, Military Retirement: Background and Recent Developments, by David F. Burrelli and
Barbara Salazar Torreon, CRS Report RL33537, Military Medical Care: Questions and Answers, by Don J. Jansen, and
CRS Report RS22402, Increases in Tricare Costs: Background and Options for Congress, by Don J. Jansen.
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Military Pay: Key Questions and Answers
subsidized grocery stores (commissaries) and child care centers, and space-
available travel on military aircraft.
• The main elements of deferred compensation are retired pay and retiree health
care, but continuing access to commissaries, space-available travel, and other
benefits are also part of this. Servicemembers also have access to the Thrift
Savings Plan, although they generally do not receive matching contributions
from the government.
Some of these compensation elements are provided to all servicemembers, while others
are provided only to certain populations. The basic compensation package provided to all
servicemembers includes basic pay, a housing allowance (or government-provided
housing), a subsistence allowance (or government-provided meals), free medical and
dental care for servicemembers, free or low-cost medical and dental care for dependents,
paid annual leave, and certain other benefits. Table 1 summarizes the main elements of
compensation provided to all servicemembers. Servicemembers may also receive
additional cash compensation based on their occupational specialty, duty assignment, or
other factors.
2. What is Regular Military Compensation (RMC)? How much do
Servicemembers receive in RMC?
When people talk about military pay, they are often only referring to “basic pay.” Although basic
pay is usually the largest component of cash compensation that a servicemember receives, there
are other types of military pay that add significantly to it, and there are tax benefits as well.
“Regular Military Compensation” is a statutorily defined measure of the major compensation
elements which every servicemember receives. It is widely used as a basic measure of military
cash compensation levels, and for comparisons with civilian salary levels.
Regular Military Compensation (RMC)
RMC, as defined in law, is “the total of the following elements that a member of the uniformed
services accrues or receives, directly or indirectly, in cash or in kind every payday: basic pay,
basic allowance for housing, basic allowance for subsistence, and Federal tax advantage accruing
to the aforementioned allowances because they are not subject to Federal income tax.”3 Though
military compensation is structured much differently than civilian compensation, making
comparison difficult, RMC provides a more complete understanding of the cash compensation
provided to all servicemembers and therefore is usually preferred over just basic pay when
comparing military with civilian compensation, analyzing the standards of living of military
personnel, or studying military compensation trends over time.
3 Statutory definition contained in 37 U.S.C. 101(25).
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Table 1. Major Compensation Elements Provided to All Active Duty Personnel
Statutory
Name
Authority Purposea Description
Basic Pay
37 USC 203,
“Basic pay is the primary means of compensating
Provided to al servicemembers. Rate of payment varies based on
204, 1009
members of the armed forces for their service to rank and years of service.
the country. Except during periods of
unauthorized absence, excess leave, and
confinement after an enlistment has expired,
Click here for 2015 Basic Pay Rates.
every member is entitled to basic pay while on
active duty. Basic pay is paid to individual
members on a regular basis; the amount of basic
pay to which a particular member is entitled
depends on the member’s pay grade and length
of service.”
Government-provided housing
The government provides housing to many servicemembers and
their families, but the large majority live off-post in the civilian
or
housing market and receive BAH or OHA.
Basic Allowance for Housing
BAH and OHA “provide a cash allowance to
BAH is provided to servicemembers based in the United States not
(BAH)
military personnel not provided with government
37 USC 403
provided with government housing; OHA to those based outside
quarters adequate for themselves and their
or
the United States. Rate varies based on servicemember’s rank,
dependents to enable such personnel to obtain
location, and whether or not the servicemember has dependents
Overseas Housing Allowance
civilian housing as a substitute.”
(see footnote 4 for the definition of “dependent”).
(OHA)
Click here for 2015 Basic Allowance for Housing Rates.
Click here for 2015 Overseas Housing Allowance Rates.
Government-provided meals
BAS “provide[s] a cash allowance to members of
All servicemembers receive BAS except in limited circumstances
the armed forces to defray a portion of the cost
when they are required to eat government-provided meals (e.g.,
or
of subsistence, such al owance being payable to
enlisted personnel in basic training). The BAS rate varies based on
Basic Allowance for Subsistence
37 USC 402
all enlisted and officer personnel, with variations
officer or enlisted status; enlisted receive higher BAS than do
(BAS)
to account for the unavailability of adequate
officers.
messing facilities at some duty stations.”
Click here for 2015 Basic Allowance for Subsistence Rates.
CRS-3
Statutory
Name
Authority Purposea Description
Medical and Dental Care
10 USC
“To make medical care available to members of
All servicemembers and their family members are eligible for
1071-1110
the uniformed services and their dependents in
medical care under the TRICARE system. This system provides free
order to help ensure the availability of physically
medical and dental care to the servicemember, and free or low cost
acceptable and experienced personnel in time of
medical and dental care to the servicemember’s dependents.
national emergency; to provide incentives for
armed forces personnel to undertake military
For more information on this benefit, see CRS Report RL33537,
service and remain in that service for a full
Military Medical Care: Questions and Answers, by Don J. Jansen.
career; and to provide military physicians and
dentists exposure to the total spectrum of
demographically diverse morbidity necessary to
support professional training programs and
ensure professional satisfaction for a medical
service career.”
Annual Leave
10 USC 701-
“To authorize members of the uniformed
All servicemembers are entitled to 30 days of annual leave per year
704; 37 USC
services to take a specified number of days of
(includes leave taken on weekends, holidays, or other regular days
501
leave of absence, or vacation, for rest and
off). Typically, a maximum of 60 days may be accrued, although
relaxation away from their respective duty
under certain circumstances up to 120 days may be accrued. Leave
stations; to allow the accumulation for later use
in excess of the allowable limit is forfeited at the end of the fiscal
of earned leave that cannot be currently used
year. Under limited circumstances, servicemembers may receive a
because of military, or other, exigencies; and to
cash payment in lieu of their unused leave (see 37 USC 501).
authorize cash payments as reimbursement for
accrued leave remaining unused at the expiration
of a member’s term of service.”
Life Insurance
38 USC
“To make life insurance available to members of
Available to all servicemembers, though they may opt to not
1965-1980
the uniformed services at a reasonable cost.”
purchase it. Provides up to $400,000 in life insurance coverage and
$100,000 traumatic injury coverage for the servicemember; up to
$100,000 in coverage for spouse is also available. Servicemembers
normally pay the costs for this coverage, but the government
reimburses the premiums for those serving “in the theater of
operations for Operation Enduring Freedom or Operation Iraqi
Freedom” (37 USC 437).
Click here for current SGLI rates.
CRS-4
Statutory
Name
Authority Purposea Description
Commissary 10
USC
“To allow items of convenience and necessity—
Subsidized grocery stores on military bases around the world. The
2481-85; 10
especial y items of subsistence—to be made
Defense Commissary Agency estimates average savings of about
USC 1061-
available for purchase by military personne1 at
30% compared to commercial stores, though the savings would be
64
convenient locations and reasonable prices.”
less if compared only to discount chains.
Exchange
10 USC 2481 “As a military resale and category C revenue-
Retail stores (furniture, electronics, clothing, jewelry, etc.) on
producing morale, welfare, and reaction (MWR)
military bases around the world. They do not receive direct
activity, the armed services exchanges have the
subsidies like commissaries, but do receive some indirect subsidies
dual mission of providing authorized patrons with in the form of waived or reduced costs for utilities, rent, and base
articles of merchandise and services and
services.
generating nonappropriated fund (NAF)
earnings.”
a. All entries in the “Purpose” column are taken verbatim from Military Compensation Background Papers, 11th Edition, 2011.
CRS-5
Military Pay: Key Questions and Answers
Basic Pay
For most servicemembers, basic pay is the largest element of the compensation they receive in
their paycheck and typically accounts for about two-thirds of an individual’s RMC. All members
of the armed forces receive basic pay, although the amount varies by pay grade (rank) and years
of service (also called longevity). Table 2 provides illustrative examples of basic pay rates.
Basic Allowance for Housing
All servicemembers are entitled to either government-provided housing or a housing allowance,
known as basic allowance for housing (BAH) for those living within the United States or
Overseas Housing Allowance (OHA) for those living outside of the United States. Roughly one-
third of servicemembers receive government-provided housing (in the form of barracks,
dormitories, ship berthing, or government-owned family housing), with the remainder receiving
BAH or OHA to offset the costs of the housing they rent or purchase in the civilian economy. The
amount of BAH or OHA a servicemember receives is based on three factors: paygrade (rank),
geographic location, and whether or not the servicemember has dependents.4 Paygrade and
dependency status are used to determine the type of accommodation—or “housing profile”—that
would be appropriate for the servicemember (for example, one-bedroom apartment, two-bedroom
townhouse, or three-bedroom single family home). Geographic location is used to determine the
average costs5 associated with each of these housing profiles. The average costs of these housing
profiles are the basis for BAH rates, with some additional adjustments made on the basis of
paygrade (that is, an E-7 without dependents will receive more than an E-6 without dependents,
even though the appropriate housing profile for both of them is “two bedroom apartment”). As a
result of this methodology, BAH rates are much higher in some areas than others, but
servicemembers of similar paygrade and dependents status should be able to pay for roughly
comparable housing regardless of their duty location.6 Table 2 provides illustrative examples of
how much BAH servicemembers receive annually.
Basic Allowance for Subsistence
Nearly all servicemembers receive a monthly payment to defray their personal food costs (those
who do not receive BAS—for example, enlisted personnel in basic training—receive
government-provided meals).7 This is known as basic allowance for subsistence (BAS). BAS is
4 A dependent is defined to include a spouse, unmarried children under 21 (or older in some circumstances), certain
parents dependent on the servicemembers, and certain individuals placed in the legal custody of the servicemember.
See 37 USC 401 for the complete definition. Note that for the purposes of BAH rates, no distinction is made between a
servicemember with one dependent and a servicemember with multiple dependents. The only distinction is whether or
not the servicemember has dependents.
5 Until 2015, BAH rates factored in the average costs of rental housing rates, utilities, and renter’s insurance in a wide
array of housing markets. In 2015, DOD eliminated the cost of renter’s insurance from the calculation.
6 For a more detailed description of how BAH rates are calculated, see the Department of Defense’s BAH Primer,
available here: http://www.defensetravel.dod.mil/Docs/perdiem/BAH-Primer.pdf . For a complete listing of BAH rates,
see these tables: http://www.defensetravel.dod.mil/site/pdcFiles.cfm?dir=/Allowances/BAH/PDF/
7 Historically, enlisted personnel did not receive BAS except in specific circumstances; rather, they were normally
provided free meals in government dining facilities. This changed in 2002, and enlisted personnel now receive BAS
except in limited circumstances. However, if a servicemember receiving BAS elects to eat in a government dining
facility, he or she must pay for the meal.
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Military Pay: Key Questions and Answers
provided at a flat rate: In 2015, enlisted personnel receive $367.92 a month, while officers receive
$253.38 a month.8 There have been calls in the past to merge BAS with basic pay to reduce the
complexity of military compensation and the need for BAS computations each year.
Federal Tax Advantage
Certain types of military compensation are not subject to federal income tax, thus generating a tax
benefit for servicemembers. The various types of military pay—basic pay, special pay, and
incentive pay—are considered part of gross income and are usually subject to federal income
tax.9 Military allowances, on the other hand, are generally not considered part of gross income
and are not subject to federal income tax (nor are the various in-kind benefits of the military—for
example, government housing, health care, fitness centers, subsidized grocery stores).10, 11 RMC
considers only the tax advantage provided by the exemption of BAH/OHA and BAS from gross
income. The precise value of the federal tax advantage for an individual servicemember will vary
depending on his or her unique tax situation.
Compensation Elements Not Included in RMC
RMC does not include a wide array of compensation elements: special pays and bonuses,
reimbursements, educational assistance, deferred compensation (i.e., an economic valuation of
future retired pay), or any estimate of the cash value of non-monetary benefits such as health care,
child care, recreational facilities, commissaries, and exchanges. As the value of these forms of
compensation can be very substantial, RMC should not be considered a measure of total military
compensation.
8 Enlisted personnel receive a higher BAS than officers. Historically, the government always provided enlisted
personnel with meals or a cash allowance to purchase suitable meals. The government did not always take that position
with officers; sometimes they were given a subsistence allowance, sometimes they were expected to pay for their own
meals out of their regular pay. Enlisted BAS, then, has historically been intended to cover the full cost of meals for the
servicemember; officer BAS has not been.
9 Although, these types of pay are exempt from federal taxation if earned in a combat zone by enlisted personnel and
warrant officers; for officers, these types of pay are exempt from federal taxation up to the maximum amount of
enlisted basic pay plus the amount of imminent danger pay.
10 This exemption, which reflects the long-standing exclusion of certain military benefits from gross income, was
codified in the Internal Revenue Code (26 U.S.C. 134) by the Tax Reform Act of 1986 (P.L. 99-514). For a detailed
discussion on these topics, see the Military Compensation Background Papers, 7th edition, pages 197-206, and
especially pages 873-883, available here: http://www.loc.gov/rr/frd/pdf-files/Military_Comp-2011.pdf . Table 2 of this
IRS publication is also helpful: http://www.irs.gov/pub/irs-pdf/p3.pdf .The exception to the general non-taxability of
allowances is the CONUS Cost of Living Allowance (COLA), since it was created after the 1986 Tax Reform Act.
11 26 USC 134 reads, in part, as follows:
§ 134. Certain military benefits.
(a) General rule. Gross income shall not include any qualified military benefit.
(b) Qualified military benefit. For purposes of this section--
(1) In general. The term "qualified military benefit" means any allowance or in-kind benefit (other than personal use
of a vehicle) which--
(A) is received by any member or former member of the uniformed services of the United States or any dependent of
such member by reason of such member's status or service as a member of such uniformed services, and
(B) was excludable from gross income on September 9, 1986, under any provision of law, regulation, or administrative
practice which was in effect on such date (other than a provision of this title).
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Military Pay: Key Questions and Answers
Table 2. Average Regular Military Compensation for Selected Paygrades
(2014 Data / assumes all cash pay; e.g. BAH instead of government quarters)
Estimated
Average
Average
Average
Average
Annual
Annual
Annual
Annual
Federal
Average
Pay
Basic
Housing
Subsistence
Tax
Annual
Grade
Rank
Pay
Allowance
Allowance
Advantage
RMC
E-1
Private (Army and Marine Corps)
Seaman Recruit (Navy)
$18,378 $15,474 $4,291
$3,455 $41,598
Airman Basic (Air Force)
E-5
Sergeant (Army and Marine
Corps)
Petty Officer Second Class
$33,323 $17,268 $4,291
$5,278 $60,161
(Navy)
Staff Sergeant (Air Force)
E-8
Master Sergeant or First Sergeant
(Army and Marine Corps)
Senior Chief Petty Officer (Navy)
$59,113 $22,563 $4,289
$5,029 $90,995
Senior Master Sergeant or First
Sergeant (Air Force)
O-1
Second Lieutenant (Army, Air
Force and Marine Corps)
$35,870 $16,097 $2,955
$4,558 $59,480
Ensign (Navy)
O-4
Major (Army, Air Force and
Marine Corps)
$84,062 $26,742 $2,955
$8,045 $121,803
Lieutenant Commander (Navy)
O-6
Colonel (Army, Air Force and
Marine Corps)
$123,079 $31,192
$2,955
$11,508 $168,734
Captain (Navy)
Source: Department of Defense, Selected Military Compensation Tables, 1 January 2014, B3. Estimated average
annual federal tax advantage computed using the standard deduction and 2014 tax rates; actual annual tax
advantage of servicemembers wil vary based on their unique tax situation.
3. How Are Each Year’s Increases in Basic Pay, BAH, and BAS
Computed?
Mentions of the “military pay raise” are almost always references to the annual increase in basic
pay. The statutory formula for calculating each year’s pay raise is discussed below, but basic pay
is only one element of RMC. BAH and BAS are also subject to periodic adjustment, although the
typically do not receive as much attention as increases in basic pay.
Basic Pay: Increases Are Linked to Increases in the Employment Cost Index
(ECI)
Section 1009 (c) of Title 37 provides a permanent formula for an automatic annual increase in
basic pay that is indexed to the annual increase in the Employment Cost Index (ECI) for “wages
and salaries, private industry workers.” For 2000-2006, the law required the military raise to be
equal to the ECI increase plus an additional one half percentage point (i.e., if the ECI annual
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Military Pay: Key Questions and Answers
increase were to be 3.0%, the military raise would be 3.5%). For 2007 and onwards, the law
required the raise be equal to the ECI (although Congress continued to enact increases above the
ECI through 2010).
The automatic adjustment is tied to the increase in the ECI from the 3rd Quarter of the third
preceding year to the 3rd Quarter of the second preceding year. For example, in the 12-month
period between the quarter which ended in September 2010 and the quarter which ended in
September 2011, the ECI increased by 1.7%. Hence the pay raise for 2013, as calculated by the
statutory formula, was 1.7%. This methodology means there is a substantial lag between increases
in the ECI and increases in basic pay; the lag appears to be related to the stages of the federal
budget process.12
However, under subsection (e) of this statute, the President can specify an alternative pay
adjustment that supersedes the automatic adjustment. President Obama invoked this option with
regards to the 2014 and 2015 pay raises. Additionally, Congress can pass legislation to specify the
annual pay raise, which would override the automatic adjustment and/or any presidential
adjustment if it were enacted into law.
Congress Usually Sets the Amount of the Military Pay Raise, Although This Has
Become Less Common In Recent Years
Despite the statutory formula, which could operate each year without any further action, Congress
almost always legislated a particular percentage increase in military pay every year until quite
recently. For the pay raises effective in calendar years 1981 to 2010, the only one that Congress
did not specify in law was the one which took effect in 1983. This pattern has changed in more
recent years, with no general pay raise provision enacted for calendar years 2011, 2012, 2014, and
2015, thereby allowing the permanent formula or the presidential alternative adjustment to go into
effect. However, even when the statutory formula is overridden, it remains important in
determining the pay adjustment as it provides a benchmark around which alternatives are
developed and debated.
Basic Allowance for Housing: Increases are Linked to Increases in Housing
Costs
Basic Allowance for Housing is paid to servicemembers living in the United States who are not
provided with government quarters.13 By law, the Secretary of Defense sets the BAH rates for
localities, known as military housing areas (MHAs), throughout the United States. However, the
law requires the Secretary to set the rates “based on the costs of adequate housing determined for
the area” and ties this determination to “the costs of adequate housing for civilians with
comparable income levels in the same area.”14
12 In other words, the 1.7% increase described above informed the FY2013 budget request, which was being developed
in the fall of 2011 and submitted to Congress in February of 2012, ultimately leading to passage of the FY2013
National Defense Authorization Act in late 2012, just prior to the day (January 1, 2013) that the 2013 pay raise would
go into effect.
13 Those servicemembers living overseas and not provided with government quarters receive OHA. The adjustment
mechanism for OHA is similar to that of BAH.
14 37 U.S.C. 403(b).
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To determine the cost of adequate housing, DOD conducts an annual15 survey of rental costs in
each of the MHAs.16 Rental costs are collected for various types of housing, including
apartments, townhouses, and single‐family units of varying bedroom sizes. Costs for utilities are
also collected.17 These annual surveys are used to determine how much housing costs have
increased or decreased in each MHA. If costs in a given MHA increase, the BAH rates for that
locality are adjusted upward accordingly at the start of the next calendar year. If costs in a given
MHA decrease, the BAH rates are adjusted downward. However, in the case of a downward
adjustment, a “save pay” provision on the BAH statute prevents the decrease from applying to
individuals currently assigned to that locality: “So long as a member of a uniformed service
retains uninterrupted eligibility to receive a basic allowance for housing within an area of the
United States, the monthly amount of the allowance for the member may not be reduced as a
result of changes in housing costs in the area or the promotion of the member.”18 Thus, only
personnel newly assigned to the area receive the lower payment.
Two additional points are worth mentioning. First, as increases in BAH are tied to increases in
local housing costs, they are not affected by the annual percentage increase in the ECI. Thus, the
average increase in BAH is almost always different than the increase in basic pay. Second, in
1996, housing allowances were estimated to cover about 80% of housing costs.19 Subsequent
statutory changes eliminated the “out-of-pocket” portion by 2005.20 However, the FY2015
National Defense Authorization Act allowed the Secretary of Defense to reduce BAH payments
by 1% of the national average monthly housing cost. Additionally, the Department of Defense has
indicated it will no longer consider renter’s insurance in its BAH calculations starting in 2015.
This will have the effect of reducing BAH rates by roughly an additional 1% (although DOD has
indicated that the “save pay” provision discussed above will apply)21.
15 There have been occasional proposals to survey the housing costs on which BAH is based more frequently than once
a year. These proposals typically occur when housing costs or utility costs are rising rapidly.
16 For more information on this process, see the Defense Travel Management Office’s “A Primer on the Basic
Allowance for Housing (BAH),” available here: http://www.defensetravel.dod.mil/Docs/perdiem/BAH-Primer.pdf
17 Up until 2014, costs for renter’s insurance were also collected. However, DOD recently indicated that it will no
longer consider renter’s insurance in its BAH calculations. Presumably, this means DOD will no longer collect data on
renter’s insurance.
18 37 U.S.C. 403(b)(6). An analogous provision for OHA is provided in 37 U.S.C. 403(c)(2).
19 “In creating the BAQ and the Variable Housing Allowance (VHA) [the predecessors to BAH], Congress intended to
cover 85 percent of service members housing costs. In reality though, housing allowances only covered approximately
80 percent of service members' total housing expenses in 1996. In an effort to close that gap, the Department funded a
3.0 percent increase in housing allowances in 1997, and Congress added an additional 1.6 percent. This will lower out-
of-pocket housing costs to approximately 19% percent of a service member's total costs, the lowest percentage since
before 1987.” Testimony of Fred Pang, Assistant Secretary of Defense for Force Management Policy, before the House
National Security Committee, Military Personnel Subcommittee, March 14, 1997.
20 For more information on this topic, see Department of Defense, Military Compensation Background Papers, 7th
edition, 2011, pp. 170-173, available here: http://www.loc.gov/rr/frd/pdf-files/Military_Comp-2011.pdf
21 “Two changes were made to BAH rate computations for 2015: renter’s insurance, which contributed an average of
one percent to rates, was eliminated, and the Fiscal Year 2015 National Defense Authorization Act reduced housing
rates on average one percent for service members. However, individual rate protection for service members remains an
integral part of the BAH program. This means that even if BAH rates decline—including through the elimination of
renter’s insurance and the reduction in the calculated rate—a service member who maintains uninterrupted BAH
eligibility in a given location will not see a rate decrease. This ensures that service members who have made long-term
commitments in the form of a lease or contract are not penalized if local housing costs decrease.” DOD News, “DoD
Releases 2015 Military Pay and Compensation Rates,” available here:
http://www.defense.gov/news/newsarticle.aspx?id=123873
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Basic Allowance for Subsistence: Increases are Linked to Increases in Food
Costs
BAS is paid at a uniform rate to all enlisted personnel, and at a uniform but lower rate for all
officers. By law, BAS is adjusted each year according to a formula which is linked to changes in
food prices. The increase is identical to “the percentage increase in the monthly cost of a liberal
food plan for a male in the United States who is between 20 and 50 years of age over the
preceding fiscal year, as determined by the Secretary of Agriculture each October 1.”22 BAS rates
rose 2.9% in 2015, reflecting a 2.9% increase in the cost of the food plan mentioned above
between September 30, 2013 and September 30, 2014.
4. What Have Been the Annual Percentage Increases in Active Duty
Military Basic Pay Since 1994? What Were Each Year’s Major
Executive and Legislative Branch Proposals and Actions on the
Annual Percentage Increase in Military Basic Pay?
The following subsections itemize action on the basic pay increase going back to 1994. Unless
otherwise noted, all increases were proposed to be effective on January 1 of the year indicated in
bold.
2015. Statutory Formula: 1.8%. Administration request: 1.0%. The House version of the FY2015
NDAA contained no statutory provision to specify the rate of increase in basic pay, although the
report accompanying it stated that the committee supported a 1.8% increase; it also included a
provision to prevent general and flag officers from receiving any increase in basic pay in 2015.
The Senate committee-reported version contained a provision waiving the automatic adjustment
of 37 U.S.C. 1009 and setting the pay increase at 1.0% for servicemembers, but excluded generals
and admirals. On August 29, President Obama sent a letter to Congress invoking 37 U.S.C.
1009(e) to set the pay raise for 2015 at 1.0%. No general pay raise provision included in the final
version of the NDAA, thereby leaving in place the 1.0% increase specified by President Obama
(lower than the 1.8% ECI), but section 601 of the NDAA prevented the pay increase from
applying to generals and admirals. Final increase: 1% across-the-board, excluding generals and
admirals.
2014. Statutory Formula: 1.8%. Administration request: 1.0%. The House version of the FY2014
NDAA contained no provision to specify the rate of increase in basic pay, while the Senate
committee-reported bill specified an increase of 1%. On August 30, President Obama sent a letter
to Congress invoking 37 U.S.C. 1009(e) to set the pay raise for 2014 at 1.0%. No provision
included in the final version of the NDAA, thereby leaving in place the 1.0% increase specified
by President Obama (lower than the 1.8% ECI). Final increase: 1% across-the-board.
2013. Statutory Formula: 1.7%. Administration request: 1.7%. The House version of the FY2013
NDAA supported a 1.7% across-the-board pay raise. The Senate bill contained no statutory
language. Final increase: 1.7% across-the-board.
22 37 U.S.C. 402(b)(1)(B).
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2012. Statutory Formula: 1.6%. Administration request: 1.6%. The House version of the FY2012
NDAA supported a 1.6% across-the-board pay raise, equal to the ECI. For the second consecutive
year, both the Senate-reported bill and the final version were silent on the pay raise issue. As a
result, the statutory formula became operative with an automatic January 1, 2012 across-the-
board raise equal to 1.6%. Final increase: 1.6% across-the-board.
2011. Statutory formula: 1.4%. Administration request:1.4%. The House version of the FY2011
NDAA supported a 1.9% across-the-board pay raise, 0.5% above the ECI. Both the Senate-
reported bill and the final bill were silent on the pay raise issue. As a result, the statutory formula
became operative with an automatic across-the-board raise of 1.4%; equal to the ECI. Final
increase: 1.4% across-the-board.
2010. Statutory formula: 2.9%. Administration request: 2.9%. Final increase: 3.4% across-the-
board.
2009. Statutory formula: 3.4%. Administration request: 3.4%. Final increase: 3.9% across-the-
board.
2008. Statutory formula: 3.0%. Administration request: 3.0% across-the-board. Final version:
3.5% across-the-board. The presidential veto of the initial FY2008 NDAA resulted in a 3.0% pay
raise taking effect on January 1, 2008 (statutory formula) with the remaining 0.5% being made
retroactive to January 1, 2008 upon enactment of the final version of the FY2008 NDAA (P.L.
110-181). Final increase: 3.5% across-the-board.
2007. Statutory formula: 2.2%. The statutory formula for 2007 was based solely on the ECI and
not a rate 0.5% higher than the ECI that had been specified for 2000-2006 . Administration
request: 2.2% . Final increase: 2.2% across-the-board but with an additional April 1, 2007
targeted pay raise that would be as high as 8.3 percent for some warrant officers and range from
2.5 percent for E-5s to 5.5 percent for E-9s.23
2006. Statutory formula: 3.1%. Administration request: 3.1% across-the-board. Final increase:
3.1% across-the-board.
2005. Statutory formula: 3.5%. Administration request: 3.5%. Final increase: 3.5% across-the-
board.
2004. Statutory formula: 3.7%. Administration request: Average 4.1%; minimum 2.0%;
maximum of 6.5%. Final increase: 3.7% minimum, 4.15% average, 6.25% maximum for some
senior NCOs (P.L. 108-136).
2003. Statutory formula: 4.1%. Administration request: minimum 4.1%; average 4.8%; between
5.0% and 6.5%. for some mid-level and senior noncommissioned officers, warrant officers, and
mid-level commissioned officers,. Final increase: Identical to the Administration request (P.L.
107-314).
2002. Statutory formula: 4.6%. Administration request: numerous figures for the “Administration
request” were mentioned in the pay raise debate, depending on when and which agency produced
23 Maze, Rick, “DoD seeks targeted raises of up to 8.3 percent,” Army Times, March 20, 2005.
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the figures. In general, however, they all proposed increases of at least 5% and no more than 15%
(the latter applying only to a very few individuals), depending on pay grade and years of service;
the average increase was 6.9%. Final increase: Between 5 and 10%, depending on pay grade and
years of service (P.L. 107-107).24
2001. Statutory formula: 3.7%. Administration request: 3.7%. Final increase: 3.7% across-the-
board, effective January 1, 2001, plus additional raises of between 1.0 and 5.5% for mid-grade
officer and enlisted personnel, to be effective July 1, 2001( P.L. 106-398).
2000. Statutory formula: 4.8% (based on the change to the statutory formula; the original
statutory formula would have led to a proposed raise of 3.8%). Administration request: 4.4% on
January 1, 2000, plus increases averaging an additional 1.4% for mid-grade officer and enlisted
personnel, effective July 1, 2000. Final increase: 4.8% on January 1, 2000, plus increases
averaging an additional 1.4% for mid-grade officer and enlisted personnel, effective July 1, 2000
(P.L. 106-65).
1999. Statutory formula: 3.1%. Administration request: 3.6%. The House approved 3.6%, or
whatever percentage increase was approved for federal GS civilians, whichever was higher. The
Senate approved 3.6%. The final version accepted the House provision. Final increase: 3.6%, as
GS civilians also received 3.6% (P.L. 105-261).
1998. Statutory formula: 2.8%. Administration request: 2.8%. Final increase: 2.8% (P.L. 105-85).
1997. Statutory formula: 2.3%. Administration request: 3.0%. The House and Senate versions of
the NDAA both provided for a 3.0% increase. Final increase: 3.0% (P.L. 104-201).
1996. Statutory formula: 2.4%. Administration request: 2.4%. Final increase: 2.4% (P.L. 104-
106).
1995. Statutory formula: 2.6%. Administration request: 1.6%. Final increase: 2.6% (P.L. 103-
337).
1994. Statutory formula: 2.2%. Administration request: No increase; military (and civil service)
pay would have been frozen in FY1994. The Administration also proposed limiting future civil
service pay raises — and thus military pay raises, given the statutory linkage at that time of the
two compensation systems — to one percentage point less than that provided by the existing
statutory formula. These proposals were not adopted. Final increase: 2.2% (P.L. 103-160).
5. What Is An “Adequate” Level of Military Pay?
Since the end of the draft in 1972-1973, the “adequacy” of military pay has tended to become an
issue for Congress if it appears that:
24 The 2002 increase remains the largest across-the-board percentage raises since that of FY1982, which took effect on
October 1, 1981. The latter was a 14.3% across-the-board raise, which followed an 11.7% raise the previous year,
FY1981, resulting in a two-year raise of almost 28%. This was principally in response to the high inflation of the late
1970s.
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• The military services are having trouble recruiting enough new personnel, or
keeping sufficient career personnel, of requisite quality; or
• The standard of living of career personnel is perceived to be less fair or equitable
than that of demographically comparable civilians (in terms of age, education,
skills, responsibilities, and similar criteria).
The first issue is an economic inevitability on at least some occasions. In the absence of a draft,
the services must compete in the labor market for new enlistees and—a fact often overlooked—
have always had to compete in the labor market the retain the more experienced individuals who
make up the career force.25 When unemployment is low, employment opportunities in the civilian
world abound and military recruiting is more difficult; when unemployment is high, military
service becomes a more attractive alternative, and military recruiting is easier.
In recent years, recruiting and retention in the armed forces have both been quite strong,26 hence
weakening the case for compensation increases based on competition with the civilian economy
and generating discussion of possible compensation cuts and/or restructuring. However, some
observers point out that the civilian economy is still recovering from a severe recession, and that
the Air Force, Marine Corps, and Army are all in the midst of substantial drawdowns, which
makes it much easier for those military services to post strong recruiting and retention
performances. While recruiting and retention will likely remain strong in the next few years due
to force reductions and sluggish competition from the civilian economy, challenges might arise
once these factors fade.27
The second situation is frequently stated in moral or ethical terms. Proponents of this viewpoint
argue that, even if quantitative indexes of recruiting and retention appear to be satisfactory, the
crucial character of the military’s mission of national defense, and its acceptance of the
professional ethic that places mission accomplishment above survival, demands certain enhanced
levels of compensation. However, the compensation increases that occurred in the 2000s have led
many analysts to conclude that military compensation is currently quite robust in comparison to
civilian counterparts.
6. Is There a “Pay Gap” Between Military and Civilian Pay? Do
Military Personnel Make More or Less Than Their Civilian
Counterparts?
The issue of a military-civilian “pay gap” raises several questions:
25 Unlike civilian enterprises, the military services generally do not recruit mid- or senior-level personnel from outside
the existing military workforce. Rather, they rely on promotions from within to fill these positions.
26 See CRS Report RL32965, Recruiting and Retention: An Overview of FY2012 and FY2013 Results for Active and
Reserve Component Enlisted Personnel, by Lawrence Kapp.
27 Specifically, recruiting and retention requirements could increase as the drawdown nears completion in order to
stabilize the force at its desired personnel strength level. Meeting these requirements might also be made more difficult
due to increased competition from a more robust economy, fewer resources allocated to recruiting and retention, or the
development of negative attitudes about military career prospects and job satisfaction. If such a scenario were to occur,
its impact on recruiting and retention could become evident in the next three to five years. For more information on the
recruiting and retention issues of the 1990s, see CRS Report RL31297, Recruiting and Retention in the Active
Component Military: Are There Problems?, by Lawrence Kapp.
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• How can the existence of a gap be determined and the gap be measured?
• Is there a gap, with civilians or the military being paid more? If so, how much of
a gap?
• If there is a gap, does that in itself require action?
A wide range of studies over the past several decades have attempted to compare military and
civilian (both federal civil service and private sector) compensation. In general, the markedly
different ways in which civilian public and private sector compensation and benefit systems are
structured, compared to that of the armed forces, make it difficult to validate any generalizations
about whether there is a “gap” between military and civilian pay.28
Measuring and Confirming a “Gap”
It is extremely difficult to find a common index or indicator to compare the dollar values of
military and civilian compensation. First, military compensation includes numerous separate
components, whose receiving population and taxability vary widely. Which of these, if any,
should be included in a military-civilian pay comparison? Furthermore, total military
compensation includes a wide range of non-cash benefits—health care, commissary access,
recreational facilities—as well as a unique deferred compensation package. Few civilians work in
organizations where analogous benefits are provided. Attempts to facilitate a comparison by
assigning a cash value to non-cash benefits almost always founder on the large number of
debatable assumptions that must be made to generate such an estimate.
Second, it is also extremely difficult to establish a comparison between military ranks and pay
grades on the one hand and civilian jobs on the other. The range of knowledge, supervision, and
professional judgment required of military personnel and civilians performing similar duties in a
standard peacetime industrial or office milieu may be roughly equivalent. However, when the
same military member’s job in the field and in combat is concerned, comparisons become
difficult.
Third, generally speaking, the conditions of military service are frequently much more arduous
than those of civilian employment, even in peacetime, for families as well as military personnel
themselves. This aspect of military service is sometimes cited as a rationale for military
compensation being at a higher level than it otherwise might be. On the other hand, the military
services all mention travel and adventure in exotic places as a positive reason for enlistment
and/or a military career, so it may be misleading to automatically assume that this is always a
liability.
Fourth, comparisons between different sets of compensation statistics, and the use of these
comparisons to determine what military pay should be, can yield very different results.
28 Some advocates for federal civil servants argue that federal civilian pay lags behind private sector pay, which in turn
leads some people to infer that military pay lags behind private sector pay (given the past linkage between civil service
and military pay percentage increases). A separate debate, more common about a decade ago, was over “pay parity”
between the percentage increases in military and federal civil service pay. The issue has been whether the civil service
should get a percentage raise identical to that of the military, or whether the military should get a higher raise because
of (1) the much greater degree of danger and hardship military service entails, compared to most civilian employment,
especially in time of war, and (2) the need to cope with actual or forestall potential military recruiting and retention
problems.
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Comparing dollar amounts may lead to different conclusions than comparing the annual
increases in pay for each position. The percentage increase in pay over different time periods is
more often than not very different. Different indexes with different components can be used to
determine compensation changes.
Finally, the level of specificity used in a pay comparison can lead to sharply differing results,
especially when the comparison is between private sector and federal pay as a whole, both civil
service and military. For instance, Army colonels may, according to some indexes, be paid
roughly as much as federal civil service GS-15s, or as much as private sector managers with
certain responsibilities. Thus, those occupational specialties that are highly paid in the private
sector—health care, information technology, some other scientific and engineering skills, are
examples—are frequently paid considerably less in the military or in the civil service. Other
common subcategories for comparison, in addition to occupational skill, include age, gender,
years in the labor force, and educational levels.
As noted by the Congressional Budget Office:29
Comparing compensation in the military and civilian sectors can be problematic. One
obvious limitation is that such comparisons cannot easily account for different job
characteristics. Many military jobs are more hazardous, require frequent moves, and are less
flexible than civilian jobs in the same field. Members of the armed forces are subject to
military discipline, are considered to be on duty at all times, and are unable to resign, change
jobs at will or negotiate pay. Military personnel also receive extensive training, paid for by
the government. Family support programs are generally more available in the military
compared with civilian employers. Intangible rewards, such as a shared sense of purpose,
may be higher among military personnel as well. Quantifying those elements among military
and civilian personnel is extremely difficult.
Estimates of a Military-Civilian Pay Gap
Various comparisons of military and civilian compensation in have been cited either to illustrate a
gap that favors civilian pay levels, to refute the existence of such a gap or, more recently, to show
that the pay gap favors the military. Many of these reports lack precision in identifying what
aspects of military pay were compared with civilian pay; which indexes were used to make the
comparison, or the length of time covered by the comparison. One common estimate, which
indicates there is a pay gap in favor of civilians, asserts that rough pay parity existed between
civilian and military personnel in 1982, but that increases since then in military basic pay have
not kept up with increases in civilian pay (as measured by the ECI). As a result, there has been a
pay gap of between 2% and 13% over the past several decades.30 However, using the same
starting date (1982) but considering RMC rather than just basic pay, the Congressional Budget
Office came to a much different conclusion:
With RMC substituted for basic pay in the comparison, the total growth in military
compensation since 1982 has exceeded the growth in the ECI for private-sector wages and
29 “Evaluating Military Compensation”, Congressional Budget Office, June, 2007, p.2.
30 See, for example, the cumulative pay gap chart in “The Bottom Line – Slow the Growth or Pay Caps – You Choose,”
Military Officer’s Association, October 18, 2013, available here: http://www.moaa.org/MROctBottomLine/ .
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salaries by about 11 percent...Including the value of noncash and deferred benefits would
probably add to that cumulative difference. 31
Another approach to estimating a pay gap attempts to compare actual compensation levels of
military personnel to civilians with similar education and experience, rather than comparing rates
of compensation increase over time. For example, the 9th Quadrennial Review of Military
Compensation (QRMC), published in 2002, compared the RMC of junior enlisted to the earnings
of civilian high school graduates, middle grade NCOs with civilians with some college education,
and senior enlisted personnel with civilians who are college graduates. It compared the RMC of
officers to the earnings of civilians with bachelors or advanced degrees in professional or
managerial occupations. Based on a separate body of research, it argued that “Pay at around the
70th percentile of comparably educated civilians has been necessary to enable the military to
recruit and retain the quantity and quality of personnel it requires”32 and pointed out those groups
of military personnel that fell short of this compensation goal. Several rounds of pay table reform
were approved by Congress to address situations where servicemembers fell below the 70%
mark. Additionally, general increases in basic pay higher than the rate of increase in the ECI
(2000-2010) and the elimination of “out-of-pocket” housing expenses by 2005 pushed
servicemember RMC up substantially in relation to their civilian counterparts. According to the
11th QRMC, by 2009 military compensation had substantially exceeded this goal:
In 2009, average RMC for enlisted members exceeded the median wage for civilians in each
relevant comparison group—those with a high school diploma, those with some college, and
those with an associate’s degree. Average RMC for the enlisted force corresponded to the
90th percentile of wages for civilians from the combined comparison groups. For officers,
average RMC exceeded wages for civilians with a bachelor’s or graduate-level degree.
Average RMC for the officer force corresponded to the 83rd percentile of wages for the
combined civilian comparison groups.33
While estimating the pay gap continues to be a challenge, the substantial increases in military pay
in the 2000s have markedly improved the compensation of military personnel relative to their
civilian counterparts.
If There Is a Pay Gap, Does It Necessarily Matter?
Some have suggested that the emphasis on a pay gap, whether real or not, is unwarranted and not
a good guide to arriving at sound policy. They argue that the key issue is, or should be, not
comparability of military and civilian compensation, but the competitiveness of the former.
Absent a draft, the armed forces must compete in the labor market for new enlisted and officer
personnel. The career force by definition has always been a “volunteer force,” and thus has
always had to compete with civilian opportunities, real or perceived. Given these facts, some ask
what difference it makes whether military pay is much lower, the same, or higher than that of
civilians? If the services are having recruiting difficulties, then pay increases might be
31 Statement of Carla Tighe Murray, Senior Analyst for Military Compensation and Health Care, before the
Subcommittee on Personnel Committee on Armed Services, United States Senate, “Evaluating Military
Compensation,” April 28, 2010, p. 7, available here: http://www.cbo.gov/sites/default/files/04-28-MilitaryPay.pdf.
32 Department of Defense, 9th Quadrennial Review of Military Compensation, March 2002, p.xxiii, available here:
http://militarypay.defense.gov/reports/qrmc/9th_QRMC_Report_Volumes_I_-_V.pdf.
33 Department of Defense, 11th Quadrennial Review of Military Compensation, June 2012, p.xvii, available here:
http://militarypay.defense.gov/reports/qrmc/11th_QRMC_Main_Report_(290pp)_Linked.pdf.
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appropriate, even if the existing “gap” favors the military. Conversely, if military compensation is
lower than equivalent civilian pay, and if the services are doing well in recruiting and retaining
sufficient numbers of qualified personnel, then there might be no reason to raise military pay.
The 11th QRMC voiced similar sentiments when it argued:
A comparison between military and civilian wages does not, by itself, determine if military
pay is at the optimal level. As previously noted, other factors are also at play including:
recruiting and retention experiences and outlook; unemployment in the civilian economy;
political factors, such as a wartime environment or risk of war; and the expected frequency
and duration of overseas deployments. But the relative standing of military compensation
provides context to help make decisions about RMC and other elements of the compensation
system, such as those studied by the QRMC.34
7. What Additional Benefits Are Available For Military Personnel
Serving in Iraq and Afghanistan?
Members of the armed forces serving in Iraq or Afghanistan are entitled to various additional
forms of compensation, outlined below. Those serving in nearby countries are often are eligible as
well.
Hostile Fire/Imminent Danger Pay
Many military personnel serving in Iraq or Afghanistan are eligible for Hostile Fire Pay (HFP) or
Imminent Danger Pay (IDP).35 HFP is paid at the rate of $225 per month; IDP is paid at an
equivalent rate, but on a daily basis ($7.50 per day). The purpose of this pay is to compensate
servicemembers for physical danger. An individual can collect either Hostile Fire Pay or
Imminent Danger Pay, not both simultaneously. Iraq and Afghanistan are designated imminent
danger locations; any servicemember in these locations is entitled to IDP by virtue of their
presence. Many surrounding areas were formerly designated as imminent danger locations, but
DOD revoked this designation in 2014.36
Those who qualify for hostile fire pay—for example, they are actually exposed to hostile fire or
the explosion of a hostile mine—at any time in a given month receive the full $225 for that month
Until recently, a full month of IDP was paid for serving in designated imminent danger area for
any month or portion of a month. This meant that air crews, for example, could deploy to
Afghanistan or Arabian Peninsula locations for several days, depart, and receive the full monthly
special pay of $225; likewise, a servicemember arriving in an IDP location on the last day of the
34 Department of Defense, 11th Quadrennial Review of Military Compensation, June 2012, p.xvii, available here:
http://militarypay.defense.gov/reports/qrmc/11th_QRMC_Main_Report_(290pp)_Linked.pdf
35 37 U.S.C. 310. DOD regulations distinguish between Hostile Fire Pay and Imminent Danger Pay, but both are
derived from the same statute.
36 For example, DOD ended the imminent danger designation for Kuwait, Bahrain, Oman, Qatar, Saudi Arabia, United
Arab Emirates, Kyrgyzstan, Tajikistan, Uzbekistan on May 31, 2014. For a list of all imminent danger locations, see
Figure of this document: http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_07a.pdf
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month received the full $225. This was changed by the FY2012 NDAA37 which now requires the
IDP to be paid on a daily basis (i.e., $7.50 per day) .
Hardship Duty Pay
Military personnel serving for over 30 days in Iraq, Afghanistan, and certain surrounding
countries are eligible for Hardship Duty Pay (HDP).38 HDP is compensation for the exceptional
demands of certain duty. In the case of Iraq and Afghanistan, it is compensation for the austere
conditions of the location. The rate for HDP in Iraq and Afghanistan is $100 per month.39
Family Separation Allowance
Military personnel serving in Iraq, Afghanistan, and surrounding areas may be eligible for Family
Separation Allowance (FSA).40 FSA provides a special pay for those servicemembers with
dependents who are separated from their families for more than 30 days. The purpose of this pay
is to “partially reimburse, on average, members of the uniformed services involuntarily separated
from their dependents for the reasonable amount of extra expenses that result from such
separation....”41 To be eligible for this allowance, U.S. military personnel must be separated from
their dependents for 30 continuous days or more; but once the 30-day threshold has been reached,
the allowance is applied retroactively to the first day of separation. The authorizing statute for
FSA sets the rate at $250 per month.
Per Diem
Military personnel using military facilities and serving in Iraq, Afghanistan, and surrounding
areas also receive per diem equivalent to $105 per month to cover incidental expenses. The rate is
the same for all personnel.
Combat Zone Tax Exclusion
One of the more generous benefits for many of those serving in Iraq or Afghanistan, and certain
surrounding areas,42 is the “combat zone tax exclusion.”43 Military personnel serving in direct
support of operations in these combat zones are also eligible for the combat zone tax exclusion, as
are those “hospitalized as a result of wounds, disease, or injury incurred while serving in a
combat zone.”44 For enlisted personnel and warrant officers, this means that all compensation for
37 Section 616, P.L. 112-81, December 31, 2011.
38 37 U.S.C. 305. The maximum amount of HDP previously permitted by the statute was $300 per month; this
maximum was increased to $750 per month by the FY2006 NDAA and then raised to $1,500 per month by the FY2008
NDAA. However, this figure is a cap; DOD has discretion to offer lesser amounts.
39 For a complete listing of HDP locations, see Figure 17-1 of this document:
http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_07a.pdf.
40 37 U.S.C. 427.
41 Department of Defense, Military Compensation Background Papers, 7th Edition, November 2011, p. 823, available
here: http://www.loc.gov/rr/frd/pdf-files/Military_Comp-2011.pdf .
42 For a listing of areas that qualify for the combat zone tax exclusion, see http://www.irs.gov/uac/Combat-Zones.
43 26 USC 112.
44 26 U.S.C. 112; note that the hospitalization provision expires two years after the termination of combat activities in
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Military Pay: Key Questions and Answers
active military service in a combat zone is free of federal income tax. For commissioned officers,
their compensation is free of federal income tax up to the maximum amount of enlisted basic pay
plus any imminent danger pay received. While this benefit applies only to federal income tax,
almost all states have provisions extending the benefit to their state income tax as well.
In addition, military personnel who receive a reenlistment bonus while stationed in a combat zone
do not have to pay federal income tax on any of the bonus. The amounts involved can be
substantial, often in the tens of thousands of dollars, and sometimes over a hundred thousand
dollars.
Savings Deposit Program
Another benefit available to those deployed to a combat zone45 is eligibility for the Savings
Deposit Program. This program allows service members to earn a guaranteed rate of 10% interest
on deposits of up to $10,000, which must have been earned in the designated areas. The deposit is
normally returned to the servicemember, with interest, within 90 days after he or she leaves the
eligible region, although earlier withdrawals can sometimes be made for emergency reasons.
8. What Benefits Are Available to the Survivors of Military
Personnel Killed in Iraq or Afghanistan?
Currently, the survivors (typically, spouses and children) of military personnel who die while
serving in Operation Enduring Freedom (OEF) are eligible for a number of monetary and other
benefits. These generally include:
• A death gratuity of $100,000, payable within a few days of the death to assist
families in dealing with immediate expenses.
• Servicemembers’ Group Life Insurance (SGLI)46 of $400,000.47
• Disbursement of unpaid pay and allowances.
• One year of government housing or BAH.
• Three years of TRICARE coverage at the active duty dependent rate, followed by
coverage at the retiree dependent rate (children remain covered as active duty
family members until age 21).
• Commissary and Exchange access.
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the designated combat zone.
45 For a listing of areas that qualify for the combat zone tax exclusion, see http://www.irs.gov/uac/Combat-Zones.
46 All servicemembers are automatically enrolled in this benefit, which is paid for by an approximate $16 monthly
deduction from pay, members may opt out or reduce coverage, but less than 1% do so.
47 The death gratuity and the SGLI maximum amount were raised substantially by the FY2005 Supplemental
Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief (P.L. 109-13). The death gratuity was
raised from $12,420 to $100,000; and the maximum SGLI coverage was raised from $250,000 to $400,000. The 2006
NDAA applied the $100,000 death gratuity to all active-duty deaths (not just those that were combat-related) and made
the payments retroactive to October 7, 2001.
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Military Pay: Key Questions and Answers
• Burial expenses.
• One or more survivor benefit annuities (Social Security Survivor Benefits, DOD
Survivor Benefit Plan, and/or Veterans Affairs Dependency and Indemnity
Compensation; receipt of more than one annuity may require offsets between the
annuities).
Note, however, that each type of benefit described above has its own eligibility criteria.
Survivors may, or may not, qualify for a given benefit based on their unique
circumstances. For more detailed information on who qualifies for a given benefit, see
the Department of Defense’s A Survivor’s Guide to Benefits.48
Author Contact Information
Lawrence Kapp
Barbara Salazar Torreon
Specialist in Military Manpower Policy
Information Research Specialist
lkapp@crs.loc.gov, 7-7609
btorreon@crs.loc.gov, 7-8996
48 Available here:
http://www.militaryonesource.mil/12038/Project%20Documents/MilitaryHOMEFRONT/Casualty%20Assistance/Survi
vors%20Guide.pdf. See also: http://militarypay.defense.gov/reports/qrmc/. For the earlier legislative history of some of
these benefits, monetary and non-monetary, see Office of the Secretary of Defense. Military Compensation
Background Papers. 11th Edition, 2011.
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