Your unused annual leave can be a nice bonus for those retiring. Let’s dig into how it works.
Remember that annual leave and sick leave is handled very differently. Make sure you don’t mix up the two when planning for retirement.
Retirees receive a lump sum payment for their unused annual leave. The government basically pays you as if you would have worked that time. This is calculated by multiplying their hourly rate by their unused hours. This payment is projected into the future meaning your payment will be higher if you were due to get a pay raise during that time.
This hourly rate doesn’t include all types of pay but does include the following:
-rate of basic pay
-locality pay or other similar geographic adjustments
-within grade increase (if the waiting period is met on the day of separation)
-across the board annual adjustments
-administrative uncontrollable overtime pay, availability pay, and standby duty pay
-night differential for Federal Wage System (FWS) employees only
-regularly scheduled overtime pay under the Fair Labor Standards Act for employees on -uncommon tours of duty
-supervisory differentials
-non-foreign area cost-of-living allowances and post differentials
-foreign area post- allowances
This lump sum can be a very nice retirement supplement for years to come especially if you have substantial leave accumulated. Be cautious of how much leave will transfer from year to year to make sure you get the most out of this. Some people plan their retirement date right before the end of their leave-calendar year to maximise this payout.
