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Frequently Asked Questions Pay & Leave

Severance Pay

  • Under current severance pay regulations (5 CFR 550.706), employees who resign because they expect to be involuntarily separated are considered to have been involuntarily separated for severance pay purposes ONLY IF they resign after receiving-
    1. a specific written notice stating that the employee will be involuntarily separated by a particular action (e.g., reduction in force) on a particular date (see 5 CFR 550.706(a)(1); or
    2. a general written notice of reduction in force or transfer of function that announces that all positions in the competitive area will be abolished or transferred to another commuting area by a particular date no more than 1 year after the date of the notice (see 5 CFR 550.706(a)(2)).
    However, if the specific or general notice is cancelled before the resignation is effected, the resignation would not be qualifying for severance pay purposes. (See 5 CFR 550.706(c).If the specific notice deals with involuntary separation by reduction-in-force (RIF) procedures, the notice must meet the conditions in 5 CFR part 351, subpart H. A general notice has no standing under the RIF program and is not subject to RIF rules. A general notice cannot be used to meet the RIF notice requirements in 5 CFR part 351, subpart H.A Certification of Expected Separation under 5 CFR 351.807 is not a qualifying specific or general notice under the severance pay regulations.Entitlement to certain benefits--such as training assistance, priority placement rights, appeal rights, etc.--may be affected by an employee's decision to resign in advance of an actual involuntary separation action. The employing agency should inform affected employees of these implications before they accept a resignation.Even if a resignation is considered an "involuntary separation" under the severance pay rules, the employee may not be eligible for severance pay under 5 U.S.C. 5595 and 5 CFR part 550, subpart G, for other reasons. The employee must meet all applicable eligibility requirements.
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  • If a temporary promotion is made permanent immediately after the temporary promotion ends, the employee is not returned to the lower grade in order to process the permanent promotion. See 5 CFR 531.214(e). The agency must convert the temployee's temporary promotion to a permanent promotion without a change in pay. The appropriate action is to process the promotion (nature of action code 702) showing the higher grade as the grade before and after promotion. (See rules 5 and 6, Table 14-B, chapter 14, Office of Personnel Management's Guide to Processing Personnel Actions.) In effect, the promotion increase granted at the time of the temporary promotion is ratified and made permanent by the removal of the not-to-exceed-date limitation on the temporary promotion.If there is any period of time between the end of a temporary promotion and the beginning of a permanent promotion, the employee must be returned to the lower grade. As required by 5 CFR 531.215(c), the agency must recompute the employee's rate of basic pay for the lower grade as if the employee had never been temporarily promoted. Also, the agency may choose, at its discretion, to apply the maximum payable rate rule in 5 CFR 531.221 if that would yield a higher rate. Whatever method is used, the resulting rate is the basis for any subsequent promotion. With respect to the "maximum pay rate" rule, please note that an employee's highest previous rate may not be based on a rate received in a position to which the employee was temporarily promoted for less than 1 year, except upon permanent placement in a position at the same or higher grade. (See 5 CFR 531.223(b).) If an agency chooses to apply the maximum payable rate rule, it may set pay at any step equal to or less than the maximum payable rate, but not less than the rate to which the employee is entitled under the normal pay-setting rules.
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  • Severance pay liability rests with the agency employing the employee at the time of the involuntary separation that triggers the severance pay entitlement. In the scenario set forth in the question, the agency employing the employee in the time-limited job will be responsible for making severance payments when the time-limited appointment ends. Any severance pay entitlement that an employee may have based on an involuntary separation from a permanent appointment is immediately terminated (not suspended) when the employee receives a qualifying temporary appointment. (See 5 CFR 550.711.) Severance pay for an employee in a qualifying temporary appointment is triggered by the involuntary separation from that appointment (including expiration of the appointment as provided in the definition of "involuntary separation" in 5 CFR 550.703) and is computed using the rate of basic pay at the time of separation from that temporary job. (See 5 CFR 550.709(b).) Thus, the agency employing the individual in a time-limited job is liable for any severance payments. In contrast, if a temporary appointment is not qualifying for severance pay because the employee is hired 4 or more days after involuntary separation from a qualifying permanent appointment, the severance pay liability rests with the agency in which the employee had a permanent appointment. Severance payments by that agency are merely suspended during the temporary appointment.
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  • The applicable statute authorizes severance pay for employees who are "involuntarily separated from the service, not by removal for cause on charges of misconduct, delinquency, or inefficiency." (See 5 U.S.S. 5595(b).) A medical inability to perform one's duties is neither "misconduct" nor "delinquency;" therefore, the precise question is whether removal for such inability constitutes "inefficiency" for severance pay purposes. The legislative history of the severance pay statute suggests at least two guidelines for interpreting its provisions. First, severance pay is intended to help individuals who lose their Federal jobs through no fault of their own. Second, severance pay benefits should be construed liberally in favor of the employee. Accordingly, an employee who is removed for inability to perform his or her duties may receive severance pay if the inability is caused by a medical condition that is beyond the employee's control. This determination should be made by the employing agency based on acceptable medical documentation provided by the employee.
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  • Yes. By law, severance payments must be discontinued when the recipient is "reemployed by the Government of the United States." (See 5 U.S.C. 5595(d).) The U.S. Postal Service is part of the U.S. Government. The fact that Postal Service employees are not entitled to receive severance pay under section 5595 (due to the exclusion at 5 U.S.C. 2105(e)) is irrelevant. (We note that past Postal Service employment is creditable service for purposes of computing an employee's severance pay fund. See 5 CFR 550.708(b).)If the Postal Service job is without time limitation, severance payments are terminated. However, if the Postal Service job carries a definite time limitation, then severance payments are merely suspended for the duration of the time-limited appointment and may be resumed after separation. (See 5 CFR 550.710-711. Note: We plan to revise these regulations to clarify that, consistent with the law, any Federal employment terminates or suspends severance payments.)
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