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Nonforiegn Allowance and Differentials

What is Nonforeign Allowance?

A nonforeign cost-of-living allowance is an allowance paid under 5 U.S.C. 5941 to persons employed in Hawaii, Alaska, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, and territories and island possessions of the United States where the costs of living are substantially higher than those in the Washington, D.C. area. The allowance rate is established by the Office of Personnel Management and indexed to four categories of expenses: consumption of goods and services, transportation, housing, and miscellaneous expenses. Certain adjustments are made where Federal quarters and commissary exchange privileges are made available to civilian employees and result in costs substantially lower than local area costs.

What is Nonforeign Differential?

A nonforeign differential is a post differential paid under 5 U.S.C. 5941 to persons employed in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Johnston Island, Sand Island, Midway Islands and Wake Island where conditions of environment differ substantially from conditions of environment in the contiguous United States and warrant its payment as a recruitment incentive. The differential rate is established by the Office of Personnel Management.

Payment of Allowances and Differentials

Allowances and differentials are payable to employees whose permanent duty station is in the nonforeign area for which the allowance or differential is authorized. Payment begins as of the employee's effective date of regular assignment or transfer to an eligible post, and ceases on the effective date of the employee's separation or transfer to a new post of assignment. Allowances and differentials are paid as a percentage of an employee’s hourly rate of basic pay for those hours which the employee receives basic pay. With few exceptions, payment of allowances and differentials while an employee is absent from the post continues only if the employee returns to duty status in the area. However, payment of differential during periods of paid leave or travel outside the differential area continues only for the first 42 consecutive calendar days of the absence. When an employee is eligible for both a nonforeign allowance and differential, the employee will be paid the entire allowance and so much of the differential as will not cause the combined total to aggregate in excess of 25 percent of the employee’s hourly rate of pay.

Similarly, if an employee is temporarily assigned to a foreign post and is eligible for foreign post differential under 5 U.S.C. 5925, the employee will receive all of the foreign post differential, plus so much of the nonforeign allowance or differential as will not cause the combined total to aggregate in excess of 25 percent of the employee’s hourly rate of basic pay.

A nonforeign allowance or differential is not part of an employee’s basic pay for purposes of computing entitlements to overtime pay, retirement, life insurance, or any additional pay, allowance, or differential. An allowance or differential is included in the employee’s regular rate for computing overtime under the FLSA and in any lump-sum payment for accumulated and accrued annual leave of an employee who separates while in a duty status in the allowance and differential area.

References

5 U.S.C. 5941
5 UC.F.R. 591