A bill to amend title 37, United States Code, to improve the process for adjusting the rates of pay for members of the uniformed services.

Requires the monthly rates of basic military pay to be adjusted effective January 1 of each year. (Currently, such rates are adjusted whenever the General Schedule (GS) of Compensation for Federal employees is adjusted.)

Requires equal annual pay percentage increases for all military personnel to be based on percentage increases in the Employment Cost Index (currently on GS adjustments). Increases percentage adjustments by one-half percent for FY 2004 through 2006.

Requires new annual rates of pay to be published in the Federal Register and the Code of Federal Regulations.

Directs the President, upon determining that annual pay adjustments would be inappropriate because of national emergency or serious economic conditions, to prepare and transmit to Congress a plan for an alternative pay adjustment. Requires the President to consider under such plan the impact that the alternative adjustment would have on the Government's ability to recruit and retain well-qualified individuals for the armed forces.