Payment and Termination Calculations
Fact Sheet: Recruitment and Relocation Incentive Payment and Termination Calculations
Background
An agency may pay a recruitment incentive under 5 U.S.C. 5753 and 5 CFR part 575, subpart A, to an employee newly appointed to a position that is likely to be difficult to fill in the absence of an incentive. An agency may pay a relocation incentive under 5 U.S.C. 5753 and 5 CFR part 575, subpart B, to a current employee who must relocate to accept a position in a different geographic area that is likely to be difficult to fill in the absence of an incentive. The employee must sign an agreement to fulfill a period of service with the agency to receive a recruitment or relocation incentive. (See the Recruitment Incentives and Relocation Incentives fact sheets for additional information.)
Payment options
Recruitment and relocation incentives may be paid-
- As an initial lump-sum payment at the beginning of the service period;
- In equal or variable installments throughout the service period;
- As a final lump-sum payment on completion of the service period; or
- In a combination of these methods.
For example, an agency may decide to pay a portion of a recruitment incentive to an employee upon appointment to the new position, another portion when the employee completes half of the service period required by the service agreement, and a final payment when the employee completes the full service period required by the service agreement. An agency may decide to use different payment options for different incentive authorizations.
Payment calculation
An agency must determine the total amount of the recruitment or relocation incentive that will be paid to an employee for a service period when authorizing the incentive. The total amount of the recruitment or relocation incentive payments received during the service period may not exceed 25 percent of the employee's annual rate of basic pay in effect at the beginning of the service period multiplied by the number of years (including fractions of a year) in the service period (not to exceed 4 years). With OPM approval, this cap may be increased to 50 percent in certain circumstances, not to exceed 100 percent of the employee's annual rate of basic pay at the beginning of the service period. (See 5 CFR 575.109(c) and 575.209(c).)
For the purpose of computing an annual rate for an employee who does not have a scheduled annual rate of basic pay, multiply the applicable hourly rate in effect at the beginning of the service period by 2,087.
Rate of basic pay
For the purpose of calculating a recruitment or relocation incentive, a rate of basic pay includes a special rate under 5 CFR part 530, subpart C, a locality payment under 5 CFR part 531, subpart F, or similar payment under other legal authority, but excludes additional pay of any other kind. For example, a rate of basic pay excludes night shift differentials under 5 U.S.C. 5343(f) and environmental differentials under 5 U.S.C. 5343(c)(4) for Federal Wage System employees. (See the definition of "rate of basic pay" at 5 CFR 575.102 and 575.202.)
Determining the number of years in a service period
To determine the number of years in a service period, divide the total number of calendar days in the service period by 365 and round the result to two decimal places. For example, a service period covering 39 biweekly pay periods equals 546 days, and 546 days divided by 365 days equals 1.50 years.
A recruitment or relocation incentive service period must begin on the first day of a pay period and end on the last day of a pay period and may not exceed 4 years. A recruitment incentive service period may not be less than 6 months. There is no minimum service period for relocation incentives.
Example of payment calculation
The following is an example of a recruitment incentive payment calculation:
Example A: In 2005, an agency wishes to pay a recruitment incentive to a newly appointed employee in the Washington-Baltimore- Northern Virginia, DC-MD-PA-VA-WV locality pay area whose rate of basic pay is set at GS-13, step 1, and who signs a recruitment incentive service agreement to serve 39 pay periods (546 days).
Annual rate of basic pay:
$74,782 (at beginning of service period, including locality pay)Maximum recruitment incentive:
$74,782 (annual rate) × .25 (25%) × 1.5 years (546 days/365 days) = $28,043.The employee may receive recruitment incentive payments totaling up to $28,043 for a 39-pay period service agreement. The agency may (1) pay the $28,043 recruitment incentive as an initial up-front payment at the beginning of the service period, (2) divide the $28,043 recruitment incentive into equal or variable installment payments to be paid throughout the service period, (3) pay the full $28,043 at the end of the service period, or (4) use a combination of these payment methods. (Note that $28,043 is the maximum recruitment incentive that may be paid for the 39 pay periods of service. The agency may choose to pay a lower incentive for the same period of service.)
Termination of a service agreement
Information on terminating a recruitment or relocation incentive service agreement is provided in the Recruitment Incentives and Relocation Incentives fact sheets. The following table illustrates the effects of terminating a service agreement on an employee's recruitment or relocation incentive payments.
| Portion of incentive received as of the date the service agreement is terminated | Reason for Terminating Service Agreement | |
|---|---|---|
|
Management needs of the agency (5 CFR 575.111(a) and 575.211(a)) |
Employee is demoted or separated for cause, employee receives rating of record of lower than "Fully Successful", or employee fails to fulfill terms of the service agreement (5 CFR 575.111(b) and 575.211(b)) |
|
| Amount of incentive received is equal to or less than the prorated amount of the total incentive attributable to completed service |
(5 CFR 575.111(e) and 575.211(e)) |
(5 CFR 575.111(f) and 575.211(f)) |
| Amount of incentive received is greater than the prorated amount of the total incentive attributable to completed service |
(5 CFR 575.111(e) and 575.211(e)) |
(5 CFR 575.111(f) and 575.211(f)) |
Examples of calculations upon termination of a service agreement
If an agency terminates a service agreement based on management needs under 5 CFR 575.111(a) or 575.211(a), the employee is entitled to any incentive payments attributable to completed service and is entitled to retain any portion of an incentive payment he or she received that is attributable to uncompleted service. Example B illustrates this type of calculation.
Example B: An employee who signed a 364-day (26-pay period) service agreement will receive a total recruitment incentive of $28,043 in two installment payments-i.e., $14,021 at the end of 13 pay periods of completed service and $14,022 at the end of 26 pay periods of completed service. The employee receives the first payment of $14,021. However, after 20 pay periods (280 days), the employee is affected by a reduction in force and the agency terminates the service agreement. The employee is entitled to keep the $14,021 recruitment incentive payment already received and to receive a prorated share of the second planned recruitment incentive payment based on the amount of service completed. The employee would receive an additional $7,544.07 (280 days/364 days = 76.9%; 76.9% × $28,043 = $21,565.07; $21,565.07 - $14,021 = $7,544.07). (Note: If this same employee had received the $28,043 recruitment incentive as an initial lump-sum payment at the beginning of the service period, the employee would be entitled to keep the entire recruitment incentive, including the portion attributable to uncompleted service.)
If an agency must terminate a service agreement under 5 CFR 575.111(b) or 575.211(b) (when the employee is at fault), the employee is entitled to retain incentive payments previously paid by the agency that are attributable to the completed portion of the service period. If the employee received incentive payments that are less than the amount that would be attributable to the completed portion of the service period, the agency is not obligated to pay the employee the amount attributable to completed service, unless the agency agreed to such payment under the terms of the incentive service agreement. If the employee received incentive payments in excess of the amount that would be attributable to the completed portion of the service period, he or she must repay the excess amount. Example C illustrates this type of calculation.
Example C: An employee signed a 364-day (26-pay period) service agreement and received the full amount of a $28,043 relocation incentive as an initial lump-sum payment. If the agency separates the employee for conduct after 20 pay periods (280 days), the employee must repay 23.1 percent (84 days/364 days) of the incentive, or $6,477.93 ($28.043 x 23.1%). The employee may keep 76.9 percent (280 days/364 days) of the incentive, or $21,565.07 ($28,043 x 23.1%).
Recovering or waiving a debt owed the Government
If an employee must repay a portion of a recruitment or relocation incentive and fails to reimburse the paying agency for the full amount owed, the amount outstanding must be recovered from the employee under the agency's regulations for collection by offset from an indebted Government employee under 5 U.S.C. 5514 and 5 CFR part 550, subpart K, or through the appropriate provisions governing Federal debt collection if the individual is no longer a Federal employee. While the head of an agency may waive the requirement to repay the excess amount, if warranted, waivers should be rare because the employee agreed to the repayment conditions when he or she signed the service agreement.
References
- 5 U.S.C. 5753
- 5 CFR part 575, subparts A and B