Key Points for Employees

• Employees who separate from Federal service receive a lump-sum payment for unused annual leave (this does not include unused sick leave).
• Payment may take several months due to agency processing and leave account audits.
• Employees who separate from Federal service should keep a copy of their final leave and earnings statement (LES) showing their leave balances and request a copy of their SF-1150, Record of Leave Data upon Separation or Transfer for their records.
• Contact your former agency’s Human Resources Office with any questions about your lump-sum payment.
• If you return to Federal service before the end of your lump-sum leave period, expect to repay part of the payment and have those hours recredited to your leave balance.

Introduction

An employee is entitled to receive a lump-sum payment for any unused annual leave when he or she separates from Federal service (with a break of at least one full workday), or when he or she enters on active duty in the armed forces and elects to receive a lump-sum payment. Certain other employees are entitled to a lump-sum payment for accumulated and accrued annual leave. See Eligibility section below for more information. The guidance in this fact sheet applies to employees covered by the annual leave program established by subchapter I of chapter 63 of title 5 of the United States Code.

Generally, a lump-sum payment for annual leave will equal the pay the employee would have received had he or she remained employed until the expiration of the period covered by the annual leave. A lump-sum payment is paid for unused annual leave only and cannot be paid for other types of leave, such as sick leave, military leave, or home leave. For more information about what happens to other types of leave and paid time off upon transfer or separation, see the fact sheets on Leave Upon Transfer or Separation and Paid Time Off Upon Transfer or Separation.  

When an employee is reemployed in the Federal service prior to the expiration of the period representing the projected application of annual leave (i.e., the lump-sum leave period), he or she must refund the portion of the lump-sum payment that represents the period beginning on the date of reemployment and ending when the lump-sum leave period expires. Restored annual leave included in a lump-sum payment is not subject to refund even if the employee is reemployed prior to the expiration of the lump-sum leave period. After an employee pays the required lump-sum refund in full, the agency must then recredit to the employee an amount of annual leave equal to the tour-of-duty hours in the portion of the lump-sum period remaining after the employee is reemployed.

Each agency is responsible for the calculation and payment of an employee’s lump-sum payment for annual leave. Please be aware that an agency’s internal offboarding processes and the need to audit an employee’s annual leave account to ensure the payment is accurate will affect the timing of the lump-sum payment, which may take several months. Employees should contact the human resources (HR) office of their former agency with any questions.

Definitions

Accumulated and accrued annual leave means any accumulated and accrued annual leave to an employee’s credit, including use-or-lose annual leave that has not yet been forfeited and restored annual leave. It does not include donated annual leave or advanced annual leave.

Lump-sum payment means a final payment to an employee for an unused balance of accumulated and accrued annual leave.

Lump-sum leave period means the period that begins on the first workday after separation (or after another event that triggers eligibility to receive a lump-sum payment) during which an employee’s accumulated and accrued annual leave would have been used until exhausted, if the leave were continuously applied to the employee’s regular tour-of-duty hours on workdays and holidays.

Mixed tour of duty means a condition of employment for positions in which a changing workload requires an employee to work full-time or part-time for a limited portion of the year and on an intermittent basis for the remainder of the year.

Rate of basic pay means the rate of pay fixed by law or administrative action, including any applicable locality payment under 5 U.S.C. 5304, special rate supplement under 5 U.S.C. 5305, or similar payment or supplement under other legal authority, before any deductions and exclusive of additional pay of any other kind.

Restored annual leave means any annual leave restored to the employee under 5 U.S.C. 6304(d).

Transfer means the movement of an employee to another position without a break in service of 1 workday or more.

Eligibility (5 CFR 550.1203)

Mandatory Lump-Sum Payment

An agency must (neither the agency nor the employee may “opt out”) make a lump-sum payment for accumulated and accrued annual leave when an employee—

• Separates or retires from Federal service (5 CFR 550.1203(a)(1));
• Dies (5 CFR 550.1203(a)(2));
• Transfers to a position covered by a different leave system (not under chapter 63 of title 5), and the annual leave cannot be transferred, with certain exceptions (5 CFR 550.1203(a)(3));
• Transfers to a position with a different leave system to which only a portion of annual leave may be transferred (in which case only the amount of annual leave that cannot be transferred is included in the lump-sum payment) (5 CFR 550.1203(f));
• Moves to a position excluded from coverage under the leave provisions of 5 U.S.C. chapter 63 by section 6301(2), including—
  • An intermittent position for which there is no regular tour of duty;
  • A temporary position performing construction work at hourly rates;
  • A position in the Senate or House of Representatives;
  • A position in a corporation supervised by the Farm Credit Administration, if a member of the board of directors is elected or appointed by private interests; or
• Is assigned intermittent duty in a continuing employment program with a mixed tour of duty, if a lump-sum payment is required according to established agency policy (or the agency policy may require the agency to hold the employee’s annual leave in abeyance) (5 CFR 550.1203(i)).

Employee Election to Receive Lump-Sum Payment

An agency must make a lump-sum payment for accumulated and accrued annual leave when an employee —

• Enters on active duty in the armed forces and elects to receive a lump-sum payment. An employee entering active duty may request to have the accumulated and accrued annual leave remain to his or her credit until return from active duty. However, the agency must make a lump-sum payment for the employee’s restored annual leave. The agency may not recredit the restored leave when the employee returns to Federal service (5 CFR 550.1203(c)).
• Transfers to a position in a public international organization and elects to receive a lump-sum payment. An employee may request to have the accumulated and accrued annul leave remain to his or her credit. However, the agency must make a lump-sum payment for any restored annual leave. The agency may not recredit the restored leave when the employee returns to Federal service (5 CFR 550.1203(d)); or

An agency must make a lump-sum payment for forfeited annual leave when an employee is no longer in a missing status (as defined in 5 U.S.C. 5561(5)) and elects to receive a lump-sum payment for annual leave forfeited under 5 U.S.C. 6304(d) because the employee was in a missing status. Alternatively, the employee may request to have the forfeited annual leave restored in a separate leave account upon his or her return to Federal service (5 CFR 550.1203(g)). 

Prohibited Lump-Sum Payment

An agency may not make a lump-sum payment when an employee–

• Transfers between positions covered by chapter 63 of title 5 (5 CFR 550.1203(h)(1));
• Transfers to a position not covered by chapter 63 of title 5, but to which all of his or her annual leave may be transferred under a new leave system (5 CFR 550.1203(h)(2));
• Transfers to the government of the District of Columbia (D.C.) or the U.S. Postal Service (5 CFR 550.1203(h)(3));
• Is a nonappropriated fund employee of the Department of Defense (DOD) or the Coast Guard who moves without a break in service of more than 3 days to an appropriated fund position within the DOD or the Coast Guard, respectively (5 CFR 550.1203(h)(4));
• Is concurrently employed in more than one part-time position and separates from one of the part-time positions. Instead, the former agency must transfer the employee’s accumulated and accrued annual leave to the current agency (if the part-time positions are in different agencies) or credit the employee’s annual leave account in the current position (if the part-time positions are in the same agency) (5 CFR 550.1203(h)(5));
• Elects to retain his or her leave benefits upon accepting a Presidential appointment, as permitted by 5 U.S.C. 3392(c) (5 CFR 550.1203(h)(6)); or
• Transfers to a Federal position excepted from the chapter 63, title 5 leave programs by 5 U.S.C. 6301(2)(x)-(xiii). However, the agency must make a lump-sum payment for restored annual leave. The agency must hold the employee’s annual leave in abeyance for recredit if the employee is subsequently reemployed without a break in service in a position to which his or her accumulated and accrued annual leave may be transferred. If the employee later becomes eligible for a lump-sum payment under the conditions specified in this section, the current employing agency must make a lump-sum payment for the annual leave held in abeyance. The agency must compute the lump-sum payment under 5 CFR § 550.1205(b) based on the pay the employee was receiving immediately before the date of the transfer to the position excepted by 5 U.S.C. 6301(2)(x)-(xiii).

Mandatory Lump-Sum Payment of Restored Annual Leave Only

An agency must (neither the agency nor the employee may “opt out”) make a lump-sum payment for an employee’s existing balance of restored annual leave when an employee–

• Enters on active duty in the armed forces (5 CFR 550.1203(c));
• Transfers from a DOD installation undergoing base closure or realignment to another Federal position or to a DOD position not undergoing closure or realignment (5 CFR 550.1203(b));
• Transfers to a position in a public international organization (5 CFR 550.1203(d)); or
• Transfers to a Federal position excepted from the chapter 63, title 5 leave programs by 5 U.S.C. 6301(2)(x)-(xiii).

Lump-Sum Leave Period (5 CFR 550.1204)

A lump-sum payment must equal the pay an employee would have received had he or she remained in the Federal service until the expiration of the employee’s annual leave-- i.e., the lump-sum leave period. The lump-sum leave period is the period of time covered by the employee’s unused accumulated and accrued annual leave had he or she used it, including restored annual leave, and use-or-lose annual leave in excess of the employee’s maximum annual leave limitation (also known as annual leave ceiling) that has not yet been forfeited. The agency must project the lump-sum leave period beginning on the first workday occurring after the date the employee becomes eligible for a lump-sum payment (i.e., date of separation or other qualifying movement) and counting tour-of-duty hours for all subsequent workdays and holidays until the expiration of the period of annual leave. In determining the lump-sum leave period, an agency may convert a full-time employee’s tour of duty from a flexible work schedule to a standard work schedule of five 8-hour workdays per week. The lump-sum leave period may not be extended by donated annual leave under the leave transfer or leave bank programs, unused compensatory time off, or unused credit hours accumulated under a flexible work schedule.

Example A: An employee separates from Federal service on Tuesday, January 6, 2026, with 288 hours (36 workdays of 8-hour days) of unused annual leave. The lump-sum leave period begins on Wednesday, January 7, 2026, which is the first workday after separation. Projecting the 288 leave hours forward in time and applying those hours to workdays and holidays results in  the lump-sum leave period ending on Wednesday, February 25, 2026. The two holidays within this period, the Birthday of Martin Luther King, Jr., on January 19, 2026, and Washington’s Birthday on February 16, 2026, are counted as workdays and not holidays for this purpose and do not extend the lump-sum leave period beyond February 25, 2026.

Note: In Example A, the employee had a maximum annual leave limitation of 240 hours, and any annual leave in excess of that amount would be forfeited if not used by the final day of the 2025 leave year, January 10, 2026 (see our Fact Sheet: Leave Year Beginning and Ending Dates). Since the employee separated from Federal service on January 6, 2026 (before the January 10 forfeiture date), the employee had 288 hours of unused annual leave to his or her credit. The employee’s lump-sum payment would be based on 288 hours of annual leave as the 48 hours of annual leave in excess of the employee’s annual leave ceiling had not yet been forfeited. If the employee separated from Federal service after the end of the 2025 leave year (on or after January 11, 2026), he or she would have forfeited 48 (288 – 240 = 48) hours of annual leave in excess of his or her annual leave ceiling. The employee’s lump-sum payment would be based on 240 hours of unused annual leave (30 workdays of 8-hour days) to his or her credit in the new leave year.

Calculating a Lump-Sum Payment (5 CFR 550.1205)

A lump-sum payment for annual leave is calculated based on the employee’s rights at the time of separation and must equal the pay the employee would have received had he or she remained in Federal service on annual leave (excluding post differential and danger pay). An agency calculates a lump-sum payment by multiplying the number of hours of accumulated and accrued annual leave by the employee's applicable hourly rate of pay, plus certain other types of pay the employee would have received while on annual leave, excluding any allowances that are paid for the sole purpose of retaining a Federal employee in Government service (such as retention incentives and physicians comparability allowances). Please see the regulation at 5 CFR 550.1205(a) for calculations based on weekly rates or annual rate of pay.

Types of Pay Included in a Lump-Sum Payment

An agency must compute a lump-sum payment (1) using only the following types of pay in effect immediately prior to the date the employee becomes eligible for a lump-sum payment (i.e., at the time of separation) and (2) applying certain pay adjustments that become effective during the lump-sum leave period, as applicable. See 5 CFR 550.1205(b).

Pay in Effect at the Time of Separation

• Rate of basic pay (Note: If an employee met the waiting period for a within-grade increase as of the date of separation or other date when an employee became eligible for a lump-sum payment, use the rate of basic pay after increasing it to the next higher step rate)
• Locality payment under 5 U.S.C. 5304 or a similar geographic payment or supplement
• Special rate supplement under 5 U.S.C. 5305 or a similar payment or supplement
• Administratively uncontrollable overtime pay, availability pay, and standby duty pay
• Night differential for Federal Wage System employees only (for payments that would have been made for night-shift work during periods within the employee’s lump-sum leave period)
• Regularly scheduled overtime pay under the Fair Labor Standards Act for employees on uncommon tours of duty
• Border Patrol overtime supplement for overtime work within a Border Patrol agent’s regular tour of duty
• Supervisory differential
• Nonforeign area cost-of-living allowance and post differential
• Foreign area post allowance (if separated at overseas location)
• Other authorized types of pay as prescribed in regulation or standards by the head of an agency when authorized under 5 CFR 550.1205(c)

Example B: An employee who is a criminal investigator receiving law enforcement availability pay in Tucson, Arizona, separates from Federal service. His established basic tour of duty included a Sunday workday, which generated Sunday premium pay. He had a retention incentive (paid in addition to a rate of basic pay for the sole purpose of encouraging an employee to remain in Government service). At the time of separation, he was 2 weeks away from completing the required waiting period for a within-grade increase and had 240 hours of unused annual leave. The employee’s lump-sum payment will include his rate of basic pay, the locality payment for Tucson, and his law enforcement availability pay. It will not include his Sunday premium pay or his retention incentive. It will also not include a within-grade increase, since he did not meet the requirements for the increase prior to the date of separation. 

Adjustments in Pay (5 CFR 550.1205(b)(2) and (3))

An agency must adjust the lump-sum payment to reflect any statutory pay adjustments or general system-wide pay increases that become effective during the lump-sum leave period. This includes any General Schedule across-the-board pay adjustment under 5 U.S.C. 5303, locality pay adjustment under 5 U.S.C. 5304, special rate adjustment under 5 U.S.C. 5305, and similar statutory or general pay adjustments that become effective during the lump-sum leave period. The agency must adjust the lump-sum payment to reflect the increased rate on and after the effective date of the applicable pay adjustment.

Example C: An employee separated from Federal service on Friday, January 3, 2025, with 240 hours (30 workdays of 8-hour days) of unused annual leave. The employee’s lump-sum leave period began on Monday, January 6, 2025, which was the first workday after separation. Projecting the 240 leave hours forward in time and applying those hours to workdays and holidays  (in this scenario, the holiday for the Birthday of Martin Luther King, Jr., on January 20, 2025) results in the lump-sum leave period ending on February 14, 2025. The employee’s lump-sum payment was initially based on the employee’s applicable hourly rate of pay, plus certain other types of pay the employee would have received while on annual leave as prescribed in 5 CFR 550.1205. An across-the-board pay adjustment and locality pay adjustment became effective on January 12, 2025, which would have increased the employee’s rate of pay had he remained employed during his lump-sum leave period. Thus, for the period of the lump-sum payment that included hours on or after January 12, 2025, the employee’s lump-sum payment was adjusted to reflect the increased rate of pay through the remaining lump-sum leave period. The employee’s lump-sum payment was calculated using 40 hours at the rate of pay the employee was receiving at the time of separation (for the January 6-11 period containing five 8-hour workdays) and was increased for the remainder of the 200 hours at the increased rate of pay based on the across-the-board and locality pay adjustments (for the January 12-February 14 period).

Return to Federal Service and Possible Refund (5 CFR 550.1206)

If an employee who received a lump-sum payment for annual leave is reemployed in the Federal service, prior to the expiration of the lump-sum leave period, in a position covered by the annual leave provisions of chapter 63 of title 5 or other formal leave system to which annual leave can be recredited, he or she must refund the portion of the lump-sum payment that represents the period beginning on the date of reemployment and ending when the lump-sum leave period expires. The agency must compute the lump-sum refund based on the pay used to compute the lump-sum payment, even if the employee is reemployed at a lower or higher rate of pay.

The agency cannot waive collection of the lump-sum refund but may establish internal policies to permit the refund to be paid in installments, as long as a full refund is made within 1 year after reemployment. The requirement to pay a refund applies to individuals—

1. reemployed as a Federal Government employee covered by the leave system established in chapter 63 of title 5 or under a different formal leave system in which the leave may be recredited,
2. reemployed as a leave-exempt Presidential appointee,
3. reemployed by the Federal Government after receiving a lump-sum payment after separation from the D.C. Government (if first hired by the D.C. government after October 1, 1987), and
4. reemployed by the Federal Government as a reemployed annuitant under a temporary appointment of less than 90 days.

A lump-sum refund is not required when an employee is reemployed in a position listed in 5 U.S.C. 6301(2)(ii), (iii), (vi), or (vii), or in a position that has no leave system to which annual leave can be recredited, except that if an employee is reemployed as a leave-exempt Presidential appointee, the employee must refund the lump-sum payment and have the annual leave held in abeyance.

Restored annual leave included in a lump-sum payment is not subject to refund even if the employee is reemployed prior to the expiration of the lump-sum leave period. The agency must subtract restored annual leave from the lump-sum leave period before calculating the refund.

Example D: As in Example C above, the employee separated from Federal service on Friday, January 3, 2025, with 240 hours of annual leave that was paid out in a lump-sum payment; however, in this example, the 240 hours included 40 hours of restored annual leave, and the employee was reemployed in the Federal service on Monday, January 27, 2025, before the lump-sum leave period was projected to expire on Friday, February 14, 2025.  The employee must refund the portion of the lump-sum payment that represents the period beginning on the date of reemployment and ending when the lump-sum leave period expires (January 27 through February 14).  The gaining agency must determine the amount of the lump-sum payment refund through the following steps:

1. Determine the potential number of hours subject to refund by subtracting the restored annual leave hours from the total lump-sum payment hours (240 hours – 40 hours = 200 hours).
2. Determine the number of hours of annual leave applied during period beginning on the first day of lump-sum leave period and ending on the last day before reemployment (January 6-26) by converting the number of workdays in that period (15 workdays, after excluding nonworkdays but counting the January 20 holiday) to hours (15 workdays x 8 hours = 120 hours).
3. Determine the number of hours of annual leave subject to refund by subtracting the potential number of hours subject to refund derived in step 1 from the number of hours of applied annual leave hours derived in step 2 (200 hours - 120 hours = 80 hours).

In this example, the employee must make a refund payment for 80 hours of annual leave.

Recredit of Annual Leave (5 CFR 550.1207)

After an employee pays the required lump-sum refund in full, the employing agency recredits the annual leave associated with the refund to the employee’s regular leave account in an amount equal to the days or hours of work (including holidays) in the remaining portion of the lump-sum period (after the employee is reemployed). Both the lump-sum refund and the recredit of annual leave are based on the date of reemployment and the end of the lump-sum leave period. The agency must recredit any and all annual leave hours that correspond to the lump-sum refund, except that restored annual leave is not subject to refund and may not be recredited. (The agency must subtract restored annual leave from the lump-sum leave period before it determines the amount of annual leave to recredit and the dollar amount of the refund.) If an employee is reemployed in a different leave system, the employee must refund only the amount that represents the leave that can be recredited to that system.

Example E: An employee separates from Federal service on Friday, May 2, 2025, with 240 hours (30 workdays of 8-hour days) of unused annual leave. The lump-sum leave period begins on Monday, May 5, 2025, the first workday after separation.  Projecting the 240 leave hours forward in time and applying those hours to workdays and holidays (in this scenario, the holiday for Memorial Day on May 26, 2025) results in the lump-sum leave period ending on Friday, June 13, 2025. The employee returned to Federal service in a position covered by the same leave system on Monday, June 2, 2025. The employee must refund the portion of the lump-sum payment that covers Monday, June 2, 2025, through Friday, June 13, 2025 (10 workdays of 8-hour days or 80 hours). The refund for the 80 hours of annual leave is computed using the applicable rate of pay for the position from which the employee was separated on May 2. After the employee pays the full refund, the employee is then recredited 80 hours of annual leave.

Annual Leave Ceiling

Any annual leave that is recredited becomes subject to the annual leave ceiling established under 5 U.S.C. 6304(a), (b), (c), or (f), as appropriate, for the employee’s new position. However, if the amount of annual leave to be recredited is more than the employee’s new annual leave ceiling, the agency must establish a personal leave ceiling on the date of reemployment equal to–

• the amount of recredited annual leave, if the employee’s former annual leave ceiling was established under 5 U.S.C. 6304(a), (b), (c), or (f), as appropriate; or
• the employee’s former annual leave ceiling, if the employee’s former annual leave ceiling was established under a different authority

An employee’s personal leave ceiling will be reduced if more annual leave is used than earned in a leave year until it equals the annual leave ceiling for the new position.

Example F: An employee is reemployed in the Federal Government in a position covered by the annual leave provisions of chapter 63 of title 5 and pays in full a lump-sum refund of 288 hours, the amount equal to the hours of work (for workdays and holidays) in the period beginning on the date of reemployment and ending with the expiration of the lump-sum leave period. The agency recredits 288 hours of annual leave to the employee’s regular annual leave account. The employee’s new position has a 240-hour annual leave ceiling, but because the amount of recredited annual leave is more than the employee’s annual ceiling for the new position, the agency must establish personal leave ceiling of 288 hours for the employee on the date of reemployment. The employee uses annual leave so that, accounting for additional leave accrued in the remainder of the leave year in the new position, at the end of the leave year the employee has 260 hours of unused annual leave. The employee’s personal leave ceiling is reduced to 260 hours. In the next leave year, the employee uses annual leave so that at the end of that leave year, the employee has 235 hours of unused annual leave. The employee’s annual leave balance is now below the annual leave ceiling for the new position, so the employee no longer has a personal leave ceiling. The employee’s new annual leave ceiling is 240 hours.

Important Reminders for Human Resources Offices

Human Resources offices should—

• Follow the guidance in this fact sheet and the requirements in law and regulations when computing lump-sum annual leave payments.
• Compute and pay an employee’s lump-sum annual leave payment and prepare an employee’s SF-1150, Record of Leave Data upon Separation or Transfer, as soon as possible after the employee separates from Federal service, in coordination with the agency payroll provider and after conducting a timely leave audit.
• Incorporate the following key points into a checklist for offboarding of separating employees who are eligible for a lump-sum payment–
  • The lump-sum payment will not be in their final paycheck.
  • The lump-sum payment will not include unused sick leave.
  • If employees return to Federal service before the end of their lump-sum leave period, they should expect to repay part of the payment and have those hours recredited to their leave balance.
  • A point of contact at the agency so former employees know whom to contact with any questions. Emphasize that this is the correct place to contact and not the Office of Personnel Management (OPM).
  • A reminder to employees to keep a copy of their final leave and earnings statement (LES).
  • A copy of the employee’s SF 1150, Record of Leave Data upon Separation or Transfer, after it is completed.

References:

• 5 U.S.C. 5551 and 5552
• 5 U.S.C. chapter 63
• 5 CFR part 550, subpart L
• Federal Register Notices:
  • 64 FR 36771, July 8, 1999
  • 70 FR 31314, May 31, 2005
  • 72 FR 12036, Mar. 15, 2007
  • 80 FR 58112, Sept. 25, 2015