U.S. Department of Commerce - Office of the Secretary U.S. Department of commerce seal


   
 
HR Practitioners banner

Home > HR Practitioners > Compensation & Leave

Lump Sum Payment for Annual Leave

Payment to a Separated Employee

An employee who is separated from the Federal service for one or more workdays is entitled to payment, in a lump sum, for all unused annual leave accrued through the last full pay period before separation. Unused annual leave includes any excess annual leave temporarily restored to the employee because of an exigency of the public business, illness or administrative error and is still to that employee's credit.

Payment to Certain Other Employees

Also entitled to an annual leave lump sum payment is an employee who:

Enters on active duty in the armed forces and elects not to retain his or her annual leave to his or her credit, except that restored annual leave must be liquidated by a lump sum payment;

Separates, with reemployment rights, to accept a position in a public international organization and elects not to retain his or her annual leave to his or her credit, except that restored annual leave must be liquidated by a lump sum payment;

Separates from another Federal agency and is reemployed by the Department in a position under a leave system covering only the days not in the Federal service; any unused annual leave is transferred for credit to his or her leave account; or

Moves, without a break in service, to a Federal position not under a leave system or not under a system to which annual leave is transferable, including the following:

  • A position as an intermittent or part-time employee for which there has not been established a regular tour of duty during each administrative workweek, except as described later in this policy:
  • A position as a temporary employee engaged in construction work at an hourly rate;
  • Employment by either the House of Representatives or the Senate;
  • A position with a corporation supervised by the Farm Credit Administration when any member of the corporation's board of directors is elected or appointed by a private interest;
  • An appointment without compensation; and
  • Employment on a fee basis.

Payment Upon Death

Accumulated and accrued annual leave to the credit of an employee at the time of his or her death, including any excess annual leave temporarily restored because of an exigency of the public business, illness or administrative error and is still to the employee's credit, shall be paid in a lump sum to the designated beneficiary or in the established order of precedence if no beneficiary is designated.

Any annual leave donated to an approved leave recipient under the Leave Transfer Program which remains in the employee's account at the time of his or her death shall not be credited to the employee for any purpose. In addition, advanced annual leave will not be included in a lump-sum payment.

When Lump Sum Payments Will Not be Made

A lump sum payment for unused annual leave (accumulated, accrued, and restored) may not be made to an employee who transfers without a break in service to another Federal position under the same leave system or another system to which leave is transferable.

An employee temporarily furloughed for lack of work or funds is not a separated employee and therefore not eligible for a lump sum payment unless separation from the Federal service occurs.

An employee who transfers to the government of the District of Columbia or the U.S. Postal Service is not entitled to a lump sum payment.

When an employee concurrently employed in more than one part-time position separates from one of the part-time positions, the former employing agency must transfer the employee’s accumulated and accrued annual leave to the current agency, if the positions are in different agencies. If the positions are in the same agency, the accumulated and accrued annual leave must be credited to the employee’s current leave account in the current position.

When a student trainee under a continuing program is changed to an intermittent status between full-time tours of duty, there is no separation from the Federal service; therefore, accumulated and accrued leave remains to the trainee's credit and is not liquidated by a lump sum payment.

When an employee transfers without a break in service to a position exempted from the leave system (i.e., Presidential appointees in the executive pay levels or com-parable positions), the employee's annual and sick leave is either held in abeyance until it is liquidated upon the Presidential appointee's separation or death, or is recredited upon reemployment without a break in service to a position subject to the leave provisions. Any restored annual leave to the employee's credit must be liquidated by a lump sum payment. A career SES or Senior Foreign Service Officer accepting a Presidential appointment may elect to retain his or her leave benefits and therefore continue to accumulate and use annual and sick leave, including restored annual leave.

An employee who retired from the Federal Government and is reemployed under a temporary appointment of less than 90 days prior to the expiration of the lump-sum period, must refund the lump-sum payment and be credited with the leave.

Except as otherwise provided in this policy, employees covered by the provisions of this Handbook may not receive payments in lieu of taking such leave.

Computing Lump Sum Payments

Under 5 U.S.C. 5551 or 5552, a lump sum payment must equal the pay the employee would have received had he or she remained in Federal service on annual leave, except allowances paid for the sole purpose of encouraging an employee to remain in Government service such as retention allowances, until expiration of the period of the annual leave. As standard practice, unless specifically excluded by law, pay includes those items which are not time limited which the employee is receiving at the time of separation and which are computed as a percentage of base pay or the employee's adjusted rate and paid out on a biweekly basis with pay. Sunday premium is not considered pay will not be included in a lump-sum payment. This rule covers payments such as:

  • Applicable locality payments or other similar geographic adjustments;
  • Administratively uncontrollable overtime pay, availability pay, and standby duty;
  • Across-the-board annual adjustments;
  • Night shift differential under 5 U.S.C. 5343(f) for regularly scheduled nonovertime hours for an FWS employee for the last full workweek immediately prior to the date of eligibility;
  • Regularly scheduled overtime pay under the Fair Labor Standards Act for employees on uncommon tours of duty;
  • Supervisory differentials (under 5 U.S.C. 5755) based on the percentage rate (or dollar amount) for the pay period immediately prior to the date of eligibility;
  • Nonforeign cost-of-living allowances and/or post differentials (under 5 U.S.C. 5941) if the employee’s official duty station is in the nonforeign area when he or she becomes eligible for a lump-sum payment; and
  • Foreign post allowances (under 5 U.S.C. 5941(1)) if the employee’s official duty station is in the foreign area when he or she becomes eligible for a lump sum payment.

The period of leave used for calculating the lump sum payment is the total amount of accumulated, current accrued, and available restored leave at the time of separation. A lump sum payment shall not be extended due to:

  • Any holiday occurring after the date of eligibility;
  • Annual leave donated to an employee under the Leave Transfer Program (or leave bank programs);
  • Compensatory time earned under 5 U.S.C. 5543 or 5 CFR '550.114(d) or '551.531(d); or
  • Accumulated credit hours earned under a flexible alternative work schedule.

When a statutory pay increase has been ordered but has not taken effect before the date of separation, that part of an employee's leave which extends beyond the effective date of such increase is computed at the new rate. This rule applies to new General Schedule pay rates and wage schedules issued under the prevailing rate pay system unless the issue date of the wage schedule is after the effective date of the increase and the employee separates before the issue date (31 Comp. Gen. 273; 47 Comp. Gen. 773).

Within-grade increases are included in computing the lump sum payment only if the employee completed the waiting period and met all other conditions for the increase on or before the date of separation (26 Comp. Gen. 119).

An employee receiving a retained rate of pay is entitled to have the lump sum payment computed on the basis of that rate, but if the retained rate is scheduled to terminate during the period covered by the lump sum payment, the portion of the leave which would have followed the expiration of retained rate is computed at the lower rate (5 U.S.C. 5551(a)).

An employee serving under a temporary promotion is entitled to have the lump sum payment computed on the basis of that rate, up to and including the not-to-exceed (NTE) date; and should be computed using the employee's previous rate for any period after the NTE date (5 U.S.C. 5551(a)).

When at the time of death or other separation an employee's accrued leave exceeds the amount which could have been used without forfeiture at the end of the leave year, the lump sum payment will be computed to include all leave to the employee's credit (Public Law 93-181).

Refunds of Lump Sum Payments

If an employee who has received a lump sum payment is reemployed prior to the expiration of the period covered by the lump sum payment, he or she must refund to the employing agency an amount equal to the pay covering the period between the date of reemployment and the expiration of the period covered by the lump sum payment.

An employee first hired by the government of the District of Columbia (DC) on or after October 1, 1987 who received a lump-sum payment from the DC government and who is reemployed prior to the expiration of the lump-sum leave period must refund the lump-sum payment (and be credited with the annual leave).

Annual leave included in a lump-sum payment that was restored under 5 U.S.C. 6304(d) is not subject to refund if the employee is reemployed prior to expiration of the lump-sum leave period.

The restored annual leave must be subtracted from the lump-sum leave payment before calculating the refund.

Refund is not required in the case of reemployment in positions not under a leave system or not under a system to which annual leave is transferable.

Deductions from Lump Sum Payments

Deductions made from the lump sum payment include those required for tax purposes (e.g., Federal, state, social security) and, where applicable, for recovery of an indebtedness to the United States.

Any nonforeign area cost of living allowance authorized under 5 U.S.C. 5941(a)(1) paid in connection with a lump-sum payment for annual leave is not subject to Federal income tax.

In addition, a post allowance in a foreign area authorized under 5 U.S.C. 5924(1) is not subject to Federal income tax.

Nonforeign area post differentials authorized under 5 U.S.C. 5941(a)(2) paid in connection with a lump-sum payment for annual leave are subject to Federal income tax.

No Waiver of Refund

A lump-sum payment may be paid in installments, but it may not be waived. If the refund is paid in installments, the employee must refund the payment in full within one year after the date of reemployment.

Updated October 2000.