One of the less heralded benefits of leaving federal service is the requirement that the government give you a lump-sum payment for all your unused annual leave. As a rule, that payment will equal the hourly rate of pay you would have received if you had stayed at work until the leave ran out. That’s what makes leaving at the end of the leave year so attractive. Not only do you get paid for leave that would have been lost if you had waited until the new leave year begins, but the value of each hour would be greater if there was an annual pay adjustment beginning on or after that date.
In calculating your lump-sum payment, your agency will multiply your annual leave balance by your hourly rate of pay, including any other types of pay you would have received if you used it to take annual leave. Included are such things as locality pay, within-grade increases, supervisory differentials, nonforeign area cost-of-living adjustments, foreign area post allowances, administratively uncontrollable overtime pay, availability pay, and standby duty pay, and night differentials (if you are a wage system employee).
Not included are any allowances that are paid for the sole purpose of retaining you as a federal employee, for example, retention incentives and physicians comparability allowances.
So, what happens if you leave or retire, get a lump-sum payment, and then return to work for the government? Well, if you return after the last day covered by the lump-sum payment, nothing happens. You’ll just start off with a zero annual leave balance and begin accruing more leave at the same rate you had before you left.
However, if you return before the end of the period covered by that payment, you’ll have to refund any money that represents the period between the date you were reemployed and the expiration of the period covered by the lump-sum payment. However, all is not lost. You’ll be recredited with all the leave you just paid for.
