A lump-sum payment for unused annual leave is payable to employees who separate from federal service for retirement or other reasons, or who separate for entry into active duty in the armed forces. Generally, a lump-sum payment will equal the pay the employee would have received had he or she remained employed until expiration of the period covered by the annual leave.

An agency calculates a lump-sum payment by multiplying the number of hours of accumulated leave carried forward from prior leave years (most federal employees can carry no more than 30 days of accumulated annual leave from one leave year to the next; special rules apply to certain categories) and any unused annual leave accrued in the current leave year by the employee’s applicable hourly rate of pay, plus other types of pay the employee would have received while on annual leave. Allowances for the purpose of retaining a federal employee in government service (for example, retention allowances and physicians comparability allowances) are excluded.

Calculating a Lump Payment for Annual Leave

In calculating a lump-sum payment, an agency projects forward an employee’s annual leave for all the workdays the employee would have worked if he or she had remained in service. That includes an adjustment for a general federal employee pay raise paid in that time, although not any within-grade raise the employee would have received by continuing to work for the pertinent time. By law, holidays are counted as workdays in projecting the lump payment leave period.

If an employee is reemployed in federal service prior to the expiration of the period of annual leave (that is, the lump-sum leave period), he or she must refund the portion of the lump-sum payment that represents the period between the date of reemployment and the expiration of the lump-sum period.

An agency re-credits to the employee’s leave account the amount of annual leave equal to the days or hours of work remaining between the date of reemployment and the expiration of the lump-sum leave period.