What is Severance Pay?

General Eligibility Computation Termination

Severance Pay -- General

Full-time or part-time employees who are serving on qualifying appointments and are involuntarily separated from Federal service are entitled to receive severance pay if they meet other conditions of eligibility.

A qualifying appointment is 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; a time limited appointment that takes effect within 3 calendar days after the end of one of more of the qualifying appointments.

An involuntary separation is a separation initiated by an agency against the employee�s will for reasons other than inefficiency, such as separation by reduction in force or separation by adverse action procedures after declining to transfer with his or her function. This includes a separation resulting from the expiration of a time limited appointment effected within three calendars days after separation from a qualifying appointment. When an employee is separated due to declination of a reassignment outside the commuting area, the separation is �involuntary� if the employee�s position description or other written agreement does not provide for such a reassignment. An employee who resigns because he or she expects to be involuntarily separated is considered to have been involuntarily separated if the resignation occurs after receiving (1) specific written notice that they will be involuntarily separated and the notice of separation is not canceled before the effective date of the resignation or (2) a general written notice of RIF or transfer of function that announces that all positions in the competitive area will be abolished or transferred to another commuting area.  Back

Eligibility Conditions

In addition to meeting the conditions of being involuntarily separated from a qualifying appointment, the employee must: have completed at least 12 months of continuous service (as described in 5 CFR �550.705) � This means that on the date of separation, the employee has held one or more civilian Federal positions over a period of 12 months without a single break in service of more than 3 calendar days. The positions must have been under qualifying appointments; or a non-qualifying temporary appointment that preceded the current qualifying appointment; or a DoD nonappropriated fund position that preceded the current qualifying appointment. A period during which an employee receives continuation of pay or compensation for an injury on the job is considered continuous Federal service. Also, when a break in service that is covered by severance pay interrupts otherwise continuous Federal employment the entire period is considered continuous Federal service.

have not declined a reasonable offer � This means that the employee has not signed an offer made in writing to a position in the employee�s agency in the commuting area which has the same tenure and work schedule and is not lower than two grades or pay levels below the employee�s current grade or pay level. (The requirement that the position be in the same commuting area does not apply if the employee is on a mobility agreement.)

be ineligible for an immediate annuity from a Federal civilian retirement system or from the uniformed service. �Immediate annuity� includes a reduced annuity and a disability annuity.  Back


Computation of Severance Pay

The amount of severance pay an employee receives is computed on the basis of the employee�s basic pay at the time of separation, the number of years of creditable federal service, and the age of the employee if over 40. The formula works like this:

First, the basic allowance is computed on the basis of one week�s basic salary for each full year of creditable service through ten years plus two week�s basic pay for each full year of creditable service beyond 10 years. No credit is given for service in the armed forces unless it interrupts otherwise creditable civilian service. If the employee is over 40 years of age, an age adjustment allowance is added, consisting of 2.5% of the basic severance pay allowance for each three full months s/he is over 40, or 10% of the basic severance pay allowance for each full year.

EXAMPLE: If an employee has 20 years of service and is age 45, and his basic weekly salary is $500, the severance pay is computed in this way:

Basic Allowance:

$500 (weekly salary) X 10 (first 10 years)=

$5,000

$500 (weekly salary) X (2 x 10) (years in excess of 10)=

$10,000

Total Basic Allowance = $15,000


Age Adjustment:

5 years over 40 = 60 months, divided by 3 = 20, multiplied by 2.5% = .5

2.5% of basic allowance of $15,000 = $7,500


TOTAL SEVERANCE PAY = $15,000 + $7,500 = $22,500


Normally, severance pay is paid through a series of payments aligned with the employee�s biweekly pay periods prior to separation. If an individual receiving severance pay is given a non-qualifying temporary appointment subsequent to receipt of severance pay, the severance pay is suspended on the day of the appointment. It will resume when the employee separates from the temporary appointment. If the individual who is eligible for severance pay is given a non-qualifying temporary appointment before the severance payments begin, the payments do not begin until the employee is separated from the temporary appointment.

The total amount of severance pay is limited to one year�s salary. If an employee receives severance pay for a time, then returns to Federal employment and is separated again, the employee is entitled to further severance pay but not to exceed a combined period of one year. This is a lifetime limitation.  Back


Termination of Severance Pay

Entitlement to severance pay ends when the individual is appointed to the Federal Government under a qualifying appointment, or the severance pay fund is exhausted, or the employee has received one year of severance pay.  Back


11/03/10                                                                             TOP