Severance Pay to Federal Employees

Severance pay is authorized for full-time and part-time employees who are involuntarily separated from federal service and who meet other conditions of eligibility. To be eligible for severance pay, an employee must be serving under a qualifying appointment, have a regularly scheduled tour of duty, have completed at least 12 months of continuous service, and be removed from federal service by involuntary separation for reasons other than inefficiency (i.e., unacceptable performance or conduct).

An employee is not eligible for severance pay if he or she is serving under a nonqualifying appointment; declines a reasonable offer of assignment to another position; is serving under a qualifying appointment in an agency scheduled to be terminated within one year after the date of the appointment; is receiving injury compensation; or is eligible upon separation for an immediate annuity from a federal civilian retirement system or from the uniformed services. The employing agency must determine whether an employee was provided a reasonable offer, as defined in 5 CFR 550.703.

For details about when severance pay applies in reduction-in-force situations, see RIFs – Pay.

Qualifying Appointments

The following appointments are qualifying appointments for severance pay eligibility:

  • a career or career-conditional appointment in the competitive service or the equivalent in the excepted service;
  • a career appointment in the senior executive service;
  • an excepted appointment without time limitation, except under Schedule C or an equivalent appointment made for similar purposes;
  • an overseas limited appointment without time limitation;
  • a status quo appointment, including one that becomes indefinite when the employee is promoted, demoted, or reassigned;
  • a time-limited appointment in the Foreign Service, when the employee was assigned under a statutory authority that carried entitlement to reemployment in the same agency, but this right of reemployment has expired; and
  • a time-limited appointment (or series of time-limited appointments by the same agency without any breaks in service) for full-time employment that takes effect within three calendar days after the end of a qualifying appointment.

Service Requirements

To be eligible for severance pay, an employee must have completed at least 12 months of continuous service by the date of separation. This continuous service may consist of one or more civilian federal positions held over a period of 12 months without a single break in service of more than three calendar days. The positions held must have been under one or more qualifying appointments; one or more nonqualifying temporary appointments that precede the current qualifying appointment; or an appointment to a position in a nonappropriated fund instrumentality of the Department of Defense or the Coast Guard that precedes the current qualifying appointment in the Department of Defense or the Coast Guard, respectively.

The following types of service are creditable for computing an employee’s severance pay:

  • civilian service as an employee (as defined in 5 U.S.C. 2105), excluding time during a period of nonpay status that is not creditable for annual leave accrual purposes under 5 U.S.C. 6303(a);
  • service performed with the United States Postal Service or the Postal Rate Commission;
  • military service, including active or inactive training with the National Guard, when performed by an employee who returns to civilian service through the exercise of a restoration right provided by law, executive order, or regulation;
  • service performed by an employee of a nonappropriated fund instrumentality of the Department of Defense or the Coast Guard and who moves to a civilian position with the Department of Defense or the Coast Guard, respectively, without a break in service of more than three days; and
  • service performed with the government of the District of Columbia by an individual first employed by that government before October 1, 1987, excluding service as a teacher or librarian of the public schools of the District of Columbia.

Computation of Severance Pay

An employee’s severance pay fund may consist of two parts—the basic severance pay allowance and an age adjustment allowance, if applicable.

The basic severance pay allowance consists of:

  • one week of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service through 10 years;
  • two weeks of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service beyond 10 years; and
  • twenty-five percent of the otherwise applicable amount for each full three months of creditable service beyond the final full year.

The weekly rate of basic pay for employees with variable work schedules is determined based on the weekly average for the last position held by the employee during the 26 biweekly pay periods immediately preceding separation. The regulations at 5 CFR 550.707(b) provide specific instructions on calculating the weekly rate for various types of variable work schedules, including part-time work and seasonal work.

The basic severance pay allowance is augmented by an age adjustment allowance consisting of 2.5 percent of the basic severance pay allowance for each full three months of age over 40 years.

If an individual entitled to severance pay later accepts a position with the federal government or the government of the District of Columbia, he or she is no longer eligible for severance pay and severance pay is terminated.

An employee may not receive a total of more than 52 weeks of severance pay during his or her lifetime.

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