New Buyout Max at DoD; Will Other Agencies Follow?

View this article online at http://www.fedsmith.com/2016/12/27/new-buyout-max-at-dod-will-other-agencies-follow/
By on December 27, 2016 in Agency News, Pay & Benefits with 0 Comments

Image of a wooden sign with the word 'buyout'

Whether an event is a good thing depends on the self-interest of those who are impacted.

Here is an example. President-elect Trump has indicated there will be a hiring freeze early in his administration. For those who were hoping to be hired by the federal government, that is bad news.

$40,000 Buyout Authority Authorized for DoD

On the other side, some federal employees may be thinking of leaving the federal government for another job or retiring. In that case, some may find an extra financial incentive to leave. For at least a few employees, the payoff could be as much as $40,000 (before taxes).

At least initially, the increase in a financial bonus will only apply to some employees in the Department of Defense. The National Defense Authorization Act will allow a bonus of up to $40,000 for employees leaving their job early.

Buried deep in the new legislation is a section entitled “TEMPORARY INCREASE IN MAXIMUM AMOUNT OF VOLUNTARY SEPARATION INCENTIVE PAY AUTHORIZED FOR CIVILIAN EMPLOYEES OF THE DEPARTMENT OF DEFENSE.”

In effect, the Secretary of Defense has been given legislative authority to spend up to $40,000 (instead of the current $25,000) as Voluntary Separation Incentive Pay (VSIP). The authority expires on September 30, 2017.

This is the first change in the VSIP amount since 1993.

With DoD leading the way, will other agencies be given authority to offer buyouts with higher incentives?

The new administration that will assume power in January will bring a different philosophy and objectives to the federal government. With significant changes likely coming to other agencies, options similar to the Defense Department pattern may come to light as a way of altering workforce composition.

Why The $15,000 Increase Now?

The Defense Department is restructuring its headquarters staffing. It is reportedly hoping to save $1.9 billion through a 25 percent reduction of staff costs. One way to accomplish this is through a VSIP. No doubt, raising the payout amount to a maximum of $40,000 from the previous $25,000 ceiling would help meet this goal.

The Obama administration has proposed boosting the maximum buyout payment for federal employees to $40,000. It contends a $25,000 maximum incentive is no longer sufficient. Certainly, prices and inflation have eroded the incentive of the $25,000 maximum payout. While the Defense Department is the first to receive the increase, it will likely not be the last agency to see this increase.

VSIP Offers Are Usually Limited

A VSIP is usually commonly referred to as a buyout.

There are basic eligibility requirements for buyouts. Eligibility criteria for those who will be offered a buyout are established by an agency in any buyout plan before it is approved and implemented.

A buyout is not an employee entitlement. The eligibility criteria will be restricted to allow an agency to meet its goals in reducing overhead costs or restructuring the workforce in some way.

A buyout plan describes the general categories of employees that may be offered a VSIP. Factors may include specific organizations, geographic locations, occupational categories, grade levels or retirement eligibility.

For those that do qualify, the extra money with time limits attached can speed up a person’s decision making process.

Follow Ralph on Twitter: @RalphSmith47

© 2017 Ralph R. Smith. All rights reserved. This article may not be reproduced without express written consent from Ralph R. Smith.

Tags:

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47

Top