Severance pay can provide a critical financial cushion for qualified federal employees facing involuntary separation from their jobs.
How Severance Pay is Calculated
Severance pay consists of two key elements: basic severance pay and, if you’re over 40, an age adjustment allowance. Both are based on your rate of basic pay at the time of separation, and the total amount is capped at 52 weeks of pay.
Basic Severance Pay Allowance
The foundation of your severance pay is calculated using your years of creditable federal service and your rate of basic pay. The formula varies depending on whether you have 10 years or fewer of service or more than 10 years.
- For 10 or Fewer Years of Service:
- You receive 1 week of pay for each full year of service.
- Plus ¼ week of pay for each additional full quarter (3 months) beyond the full years.
- Example: If you have 7 years and 6 months of service (7 years + 2 full quarters), your basic severance pay is 7.5 weeks.
- For 11 or More Years of Service:
- You receive 1 week of pay for each of the first 10 years.
- Plus 2 weeks of pay for each full year beyond 10 years.
- Plus ½ week of pay for each additional full quarter beyond the full years.
- Example: If you have 15 years and 3 months of service (15 years + 1 full quarter), your calculation is:
- 10 weeks (1 week × 10 years) +
- 10 weeks (2 weeks × 5 years beyond 10) +
- 0.5 weeks (½ week × 1 quarter) = 20.50 weeks.
Age Adjustment Allowance
If you’re over 40 at the time of separation, you qualify for an age adjustment allowance that boosts your basic severance pay. For every full quarter (3 months) you are over age 40, you add 2.5% to your basic severance pay allowance.
- Example: If you’re 47 years and 6 months old, you’re 7 years and 6 months (or 90 months) past 40. That’s 30 full quarters (since 90 ÷ 3 = 30). At 2.5% per quarter, this adds 75% to your basic severance pay.
- If your basic severance pay was 20.50 weeks (from the earlier example), the age adjustment increases it by 75%:
20.50 × 0.75 = 15.375 weeks.
Total severance = 20.50 + 15.375 = 35.875 weeks.
Based on the example above, if you’re 47 years and 6 months old, with 15 years and 3 months of service, and your rate of basic pay is $1,000 per week, your payout would be $35,875. Severance payments are made at the same interval as your regular salary payments.
The age adjustment can significantly enhance your payout, but the total (basic + adjustment) still cannot exceed 52 weeks of pay. If you are eligible for an immediate annuity, you don’t qualify for severance.
If you’re facing separation, check your exact years of service, age, and pay rate with your HR office to estimate your benefit. While severance isn’t a windfall, it can ease the transition to your next chapter.
