President Obama plans to extend the pay freeze for federal workers through next March, and then they would get a meager 0.5% increase.
The president and Congress already froze federal worker pay over the past two years. Obama has said pay hikes should be delayed until after Congress passes a budget to fund government for the first six months of the new fiscal year, which would run through the end of March.
Congressional leaders reached a budget deal before the August recess to fund government for six months, although they have yet to pass that legislation. The government's 2013 fiscal year begins Oct. 1.
"This decision will not materially affect the federal government's ability to attract and retain a well-qualified federal workforce," Obama wrote in a letter to House Speaker John Boehner on Tuesday.
Obama could have used his executive authority to raise worker pay by as much as 1.2%. But he instead chose a lower pay hike, saying "we must maintain efforts to keep our nation on a sustainable course" in the letter.
Several union groups said they were disappointed that the president planned to extend the pay freeze through the beginning of 2013, especially since Obama called for the pay freeze to be lifted in his budget proposal earlier this year.
"We are surprised and deeply disappointed by the administration's decision not to push for the modest federal pay adjustment that was called for in the president's budget," said William R. Dougan, president of the National Federation of Federal Employees, in a statement.
Congress hasn't addressed the federal pay freeze, although House Republicans have held hearings looking at limiting federal benefits. If Mitt Romney and Paul Ryan are elected to the White House in November, most analysts expect federal pay to be targeted.