Last week I went over the rules governing leave accumulation and use. This time I want to talk about the way in which unused annual leave can be converted into cash. For all employees that means the lump sum payment you’ll receive for unused annual leave you leave government. However, for Postal Service employees, it also includes a wrinkle known as the Leave Exchange Program.

Lump Sum Payments

While most employees use a large part of the leave they earn each year, those who are getting close to retirement are more likely to conserve it. In fact, they try to accumulate the maximum number of hours possible. That’s because they know that they can receive a lump-sum payment for any unused hours of annual leave to their credit when they retire. For most employees, including Executive and Administrative Schedule employees in the Postal Service, that means their annual leave limit plus any hours earned during the year. However, the rules for bargaining unit employees in the Postal Service are more restrictive. They may not be paid for hours that exceed their maximum limit of 440 hours.

Here’s the way the lump-sum payment system works. Any unused annual leave you have to your credit is projected forward and paid at the hourly rate you would have received if you were still on the payroll. That’s why many employees retire around the end of the year. They know that any hours that extend beyond the end of the previous leave year will be paid at the new, higher hourly rate. The more hours that cross the leave year divide, the larger your lump sum payment will be.

Leave Exchange Program

The Postal Service’s leave exchange program is divided into two categories, one for Executive and Administrative Schedule employees and the other for certain bargaining unit employees. If you are a full-time or part-time regular career EAS (non-bargaining unit) employee, you have the option of exchanging for cash up to 128 hours of the annual leave that you will earn during the next leave year. To be eligible, you must have an annual leave balance of 160 hours at the end of the current leave year.

On the other hand, some bargaining unit agreements provide a leave exchange program for covered full-time and part-time employees. To be eligible, you must have a balance of 440 hours at the end of the leave year, and must have used less than 75 hours of sick leave during the leave year. If you are eligible, you can exchange for cash up to 40 hours of the annual leave you would otherwise earn during the next leave year.