Retention Incentive Payment and Termination Calculations
Fact Sheet: Retention Incentive Payment and Termination Calculations
Background
An agency may pay a retention incentive under 5 U.S.C. 5754 and 5 CFR part 575, subpart C, to a current employee if—
- The agency determines that the unusually high or unique qualifications of the employee or a special need of the agency for the employee’s services makes it essential to retain the employee and that the employee would be likely to leave the Federal service in the absence of an incentive, or
- The agency has a special need for the employee’s services that makes it essential to retain the employee in his or her current position during a period of time before the closure or relocation of the employee’s office, facility, activity, or organization and the employee would be likely to leave for a different position in the Federal service in the absence of a retention incentive.
An agency may authorize a retention incentive for an individual employee or a group or category of employees. See the Retention Incentives (likely to leave the Federal service), Retention Incentives (likely to leave for a different Federal position), Group Retention Incentives (likely to leave the Federal service), and Group Retention Incentives (likely to leave for a different Federal position) fact sheets for additional information.
Payment options
A retention incentive may be paid—
- In installments after the completion of specified periods of service during the course of the full service period (biweekly, monthly, quarterly, etc.); or
- As a single lump-sum payment after the completion of the full period of service required by a service agreement.
An agency may not pay a retention incentive as an initial lump-sum payment at the start of a service period or in advance of fulfilling the service or installment period for which the incentive is being paid.
Payment calculation
An agency must establish a retention incentive rate for each individual or group retention incentive authorization, expressed as a percentage of an employee’s rate of basic pay. The retention incentive rate may not exceed 25 percent of an employee’s rate of basic pay, if authorized for an individual employee, or 10 percent of an employee’s rate of basic pay, if authorized for a group or category of employees. With OPM approval, this cap may be increased to 50 percent in certain circumstances. (See 5 CFR 575.309(e) and 575.314(e).)
If an agency chooses to pay retention incentives in installments, it may compute each retention incentive installment payment using the full retention incentive percentage rate established for the employee (or group of employees) or a reduced percentage rate. An agency may not pay a retention incentive to an employee who is likely to leave for a different Federal position in biweekly installments at the full retention incentive percentage rate. Each installment payment is derived by multiplying the full or reduced retention incentive percentage rate by the total rate of basic pay the employee earned during the installment period. If the retention incentive installment payment percentage is less than the full percentage rate established for the employee (or group of employees), any accrued portion of the retention incentive not paid upon completion of the installment period must be paid as part of a final installment payment after completion of the full service period under the terms of the service agreement.
A retention incentive paid as a single lump-sum payment upon completion of the full period of service required by a service agreement is derived by multiplying the retention incentive percentage rate established for the employee (or group of employees) by the total amount of basic pay earned by the employee during the full service period.
Rate of basic pay
For the purpose of calculating a retention incentive, a rate of basic pay includes a special rate under 5 CFR part 530, subpart C, or similar payment under other legal authority, and a locality-based comparability 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) or 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 575.302.)
Examples of payment calculations
10 percent retention incentive (maximum group retention incentive payment—No OPM approval required)
The following chart compares how a 10 percent retention incentive is calculated and paid using a sample of payment options available under the regulations. An agency may authorize a retention incentive for a group of employees of up to 10 percent without OPM approval.
An employee’s biweekly rate (computed under 5 U.S.C. 5504) must be used to compute a retention incentive installment or lump-sum payment. The installment payment is derived by multiplying the employee’s basic pay earned in each biweekly pay period during the installment period by the percentage retention incentive rate. In the examples below, the biweekly rate for GS-13, step 1, in Washington, DC, in 2017 ($3,633.60) is used to compute a retention incentive paid in biweekly installments, in installments after 13 and 26 pay periods of service, and as a lump-sum payment after 26 pay periods of service. (Note: The examples below use the same rate of basic pay for each installment period. However, any changes to an employee’s rate of basic, such as through a within-grade increase, will require adjustment of an installment payment.)
| Retention incentive payment option | Retention incentive rate | Basic pay earned in installment period | Retention incentive installment | Total retention bonus paid after 26 pay periods |
|---|---|---|---|---|
| Biweekly installments (26) | 10% | $3,633.60 |
$363.36 (each) ($3,633.60 x 10%) |
$9,447.36 ($363.36 x 26) |
| Installment payment provided after 13 and 26 pay periods of service | 10%
(Each installment computed at full percentage rate) |
$47,236.80 ($3,633.60 biweekly rate x 13 pay periods) |
$4,723.68 (each) ($47,236.80 basic pay earned x 10%) |
$9,447.36 ($4,723.68 incentive x 2 installments) |
| Installment payment provided after 13 and 26 pay periods of service |
10% First installment computed at a reduced percentage rate of 5% Second installment computed at 10% percentage rate, plus remaining 5% unpaid accrued incentive from first installment period |
$47,236.80 ($3,633.60 biweekly rate x 13 pay periods) |
First: $2,361.84 ($47,236.80 basic pay earned x 10% or $4,723.68, plus $2,361.84 (remaining 5% unpaid accrued incentive from first installment period |
$9,447.36 (Two installments of $2,361.84 and $7,085.52) |
| Final lump-sum payment provided after 26 pay periods of service | 10% |
$94,473.60 ($3,633.60 biweekly rate x 26 pay periods) |
$9,447.36 ($94,473.60 basic rate earned x 10%) |
$9,447.36 (One lump-sum payment of $9,447.36) |
25 percent retention incentive (maximum individual retention incentive payment—No OPM approval required)
The following chart compares how a 25 percent retention incentive is calculated and paid using a sample of payment options available under the regulations. An agency may authorize a retention incentive for an individual employee of up to 25 percent without OPM approval.
An employee’s biweekly rate (computed under 5 U.S.C. 5504) must be used to compute an installment payment or a lump-sum payment. The installment payment is derived by multiplying the employee’s basic pay earned in each biweekly pay period during the installment period by the percentage retention incentive rate. In the examples below, the biweekly rate for GS-13, step 1, in Washington, DC, in 2017 ($3,633.60) is used to compute a retention incentive paid in biweekly installments, in installments after 13 and 26 pay periods of service, and as a lump-sum payment after 26 pay periods of service. (Note: The examples below use the same rate of basic pay for each installment period. However, any changes to an employee’s rate of basic, such as through a within-grade increase, will require adjustment of an installment payment.)
| Retention incentive payment option | Retention incentive rate | Basic pay earned in installment period | Retention incentive installment | Total retention incentive paid after 26 pay periods |
|---|---|---|---|---|
|
Biweekly installments (26) |
25% |
$3,633.60 ($3,633.60 biweekly rate x 1 pay period) |
$908.40 (each) ($3,633.60 basic pay earned x 25%) |
$23,618.40 ($908.40 x 26 pay periods) |
|
Installment payment provided after 13 and 26 pay periods of service |
25% (Each installment computed at full percentage rate) |
$47,236.80 ($3,633.60 biweekly rate x 13 pay periods) |
$11,809.20 (each) ($47,236.80 basic pay earned x 25%) |
$23,618.40 ($11,809.20 incentive x 2 installments) |
|
Installment payment provided after 13 and 26 pay periods of service |
25% First installment computed at a reduced percentage rate of 15% Second installment computed at 25% percentage rate, plus remaining 10% unpaid accrued incentive from first installment period |
$47,236.80 ($3,633.60 biweekly rate x 13 pay periods) |
First: $7,085.52 Second: $16,532.88 |
$23,618.40 (Two installments of $7,085.52 and $16,532.88) |
|
Final lump-sum payment provided after 26 pay periods of service |
25% |
$94,473.60 ($3,633.60 biweekly rate x 26 pay periods) |
$23,618.40 ($94,473.60 basic rate earned x 25%) |
$23,618.40 (One lump-sum payment of $23,618.40) |
50 percent retention incentive (maximum group or individual retention incentive payment—OPM approval required)
The following chart compares how a 50 percent retention incentive is calculated and paid using a sample of payment options available under the regulations. OPM approval is required to authorize a retention incentive of more than 25 percent, up to 50 percent, for an individual employee and of more than 10 percent, up to 50 percent, for a group of employees.
An employee’s biweekly rate (computed under 5 U.S.C. 5504) must be used to compute an installment payment or a lump-sum payment. The installment payment is derived by multiplying the employee’s basic pay earned in each biweekly pay period during the installment period by the percentage retention incentive rate. In the examples below, the biweekly rate for GS-13, step 1, in Washington, DC, in 2017 ($3,633.60) is used to compute a retention incentive paid in biweekly installments, in installments after 13 and 26 pay periods of service, and as a lump-sum payment after 26 pay periods of service. (Note: The examples below use the same rate of basic pay for each installment period. However, any changes to an employee’s rate of basic, such as through a within-grade increase, will require adjustment of an installment payment.)
| Retention incentive payment option | Retention incentive rate | Basic pay earned in installment period | Retention incentive installment | Total retention incentive paid after 26 pay periods |
|---|---|---|---|---|
|
Biweekly installments (26) |
50% |
$3,633.60 ($3,633.60 biweekly rate x 1 pay period) |
$1,816.80 ($3,633.60 basic pay earned x 50%) |
$47,236.80 ($1,816.80 x 26 installments) |
|
Installment payment provided after 13 and 26 pay periods of service |
50% (Each installment computed at full percentage rate) |
$47,236.80 ($3,633.60 biweekly rate x 13 pay periods) |
$23,618.40 (each) ($47,236.80 basic pay earned x 50%) |
$47,236.80 ($23,618.40 incentive x 2 installments) |
|
Installment payment provided after 13 and 26 pay periods of service |
50% First installment computed at a reduced percentage rate of 40% Second installment computed at 50% percentage rate, plus remaining 10% unpaid accrued incentive from first installment period |
$47,236.80 ($3,633.60 biweekly rate x 13 pay periods) |
First: $18,894.72
Second: $28,342.08 |
$47,236.80 (Two installments of $18,894.72 and $28,342.08) |
|
Final lump-sum payment provided after 26 pay periods of service |
50% |
$94,473.60 ($3,633.60 biweekly rate x 26 pay periods) |
$47,236.80 ($94,473.60 basic rate earned x 50%) |
$47,236.80 (One lump-sum payment of $47,236.80) |
Examples of calculations upon termination of a service agreement
Information on terminating a retention incentive service agreement is provided in the Retention Incentives (likely to leave the Federal Service and Retention Incentives (likely to leave for a different Federal position) fact sheets. Note that in some situations, a service agreement is not required when an agency pays a retention incentive. (See 5 CFR 575.310(f).)
If an agency terminates a service agreement based on management needs under 5 CFR 575.311(a) or as described in 575.314(g)(3), the employee is entitled to retain any retention incentive payments attributable to completed service and is entitled to receive any portion of a retention incentive payment owed by the agency for completed service. The following example illustrates this type of calculation.
Example: An employee who signed a 364-day (26-pay period) service agreement will receive a total retention incentive of $9,447.36 in two installment payments-i.e., $4,723.68 at the end of 13 pay periods of completed service and $4,723.68 at the end of 26 pay periods of completed service. The employee receives the first payment of $4,723.68. However, after 15 pay periods (210 days), the employee is affected by a reduction in force, and the agency terminates the service agreement. The employee is entitled to keep the $4,723.68 retention incentive payment already received and to receive a prorated share of the second planned retention incentive payment based on the amount of service completed. The employee would receive an additional $727.45 (210 days/364 days = 57.7%; 57.7% × $9,447.36 = $5,451.13; $5,451.13 - $4,723.68 = $727.45).
If an agency must terminate a service agreement under 5 CFR 575.311(b) or 575.314(g)(2)(ii)-(iv) (when the employee is at fault or the movement to another position is at the employee’s request), the employee is entitled to retain retention incentive payments previously paid by the agency that are attributable to the completed portion of the service period. If the employee received retention 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 retention incentive service agreement.
References
- 5 U.S.C. 5754
- 5 CFR part 575, subpart C