When you leave federal service, you receive a federal annual leave lump-sum payout: a single cash payment for every hour of unused annual leave on your books, calculated at your current rate of basic pay including locality, and projected forward from your separation date as though you had stayed on the job and burned the leave down day by day. It is a statutory right under 5 U.S.C. 5551, not something the agency can decline to pay.1Office of the Law Revision Counsel. 5 USC 5551 – Lump-Sum Payment for Accumulated and Accrued Leave on Separation
Who Gets the Payout
An agency must issue a lump-sum payment when you separate or retire from federal service, when you die while employed (the payment goes to survivors or the estate), or when you transfer to a position where your annual leave cannot come with you.2eCFR. 5 CFR 550.1203 – Eligibility for a Lump-Sum Payment Voluntary resignation, mandatory retirement, and involuntary separation all count.1Office of the Law Revision Counsel. 5 USC 5551 – Lump-Sum Payment for Accumulated and Accrued Leave on Separation
One boundary matters: moving to another federal position under the same leave system without a break in service does not trigger a payout. Your balance simply follows you to the new agency. Only a real departure from the federal payroll, or a move to a position outside the standard leave system, produces cash.
How Much Leave You Can Have on the Books
The size of your check depends on how much leave you have banked. Full-time employees accrue annual leave every pay period at a rate that rises with tenure: 4 hours per pay period under 3 years of service (13 days per year), 6 hours from 3 to 14 years (20 days per year), and 8 hours at 15 or more years (26 days per year). Senior Executive Service, Senior-Level, and Scientific or Professional employees earn 8 hours per pay period from day one.3U.S. Office of Personnel Management. Fact Sheet: Annual Leave
Most employees can carry 240 hours (30 days) into the next leave year. Overseas employees can carry 360 hours, and SES, SL, and ST employees can carry 720.4Office of the Law Revision Counsel. 5 USC 6304 – Annual Leave; Accumulation Anything above the cap at the end of the leave year is forfeited unless it qualifies as restored leave under 5 U.S.C. 6304(d), which sits in a separate account and gets paid out along with the rest at separation.5eCFR. 5 CFR 550.1207 – Recrediting Annual Leave
How the Payment Is Calculated
The agency does not just multiply hours by your hourly rate. It projects your leave forward from the day after separation, treating you as though you kept working and used the hours one workday at a time. If a scheduled pay raise falls inside that window, the hours remaining after the raise are paid at the higher rate.6eCFR. 5 CFR 550.1205 – Calculating a Lump-Sum Payment
“Rate of basic pay” here means base salary plus locality pay, any applicable special rate supplement, and similar adjustments. Overtime, bonuses, and travel reimbursement are not included.7eCFR. 5 CFR 550.1202 – Definitions Night differential pay for prevailing-rate employees and standby-duty premium pay are added on, but only if you were receiving them in the period immediately before separation.6eCFR. 5 CFR 550.1205 – Calculating a Lump-Sum Payment
Federal holidays that fall right after your separation date do not extend the projection.8GovInfo. 5 CFR 550.1205 – Calculating a Lump-Sum Payment Timing your last day around a holiday cluster will not inflate the check.
A Quick Example
A GS-12, Step 5 in Washington, D.C. with 200 hours of unused annual leave earns roughly $55 per hour once the D.C. locality adjustment is included. With no pay raise in the projection window, the gross payout runs about $11,000 before taxes. If a general schedule increase takes effect three weeks into the projection, the remaining hours after that date are recomputed at the new rate, nudging the total higher.
How the Payment Is Taxed
The statute treats the lump sum as pay for taxation purposes only.1Office of the Law Revision Counsel. 5 USC 5551 – Lump-Sum Payment for Accumulated and Accrued Leave on Separation That phrase drives everything about withholdings.
Federal income tax comes out at the supplemental wage rate of 22% for 2026. If your total supplemental wages for the year cross $1 million, the rate on the excess jumps to 37%.9Internal Revenue Service. Publication 15 (2026), (Circular E), Employer’s Tax Guide10Internal Revenue Service. Publication 15-A (2026), Employer’s Supplemental Tax Guide Social Security tax (6.2%) applies unless your regular wages already carried you past the Social Security wage base before separation, in which case it drops off.11Social Security Administration. Contribution and Benefit Base
Because the money is pay only for tax purposes, no retirement contributions are withheld. The lump sum does not count toward your FERS or CSRS annuity, does not raise your high-three, and does not add to your creditable service. FEHB and FEGLI premiums are not deducted either, since those benefits end or convert at separation. A larger share of the gross reaches your account than you would see from a regular paycheck.
Sick Leave Does Not Get Paid Out
Unused sick leave has zero cash value at separation. It is never included in the lump sum. If you retire, 100% of your unused sick leave balance is converted to additional service credit for the annuity calculation, under both FERS and CSRS.12U.S. Office of Personnel Management. Fact Sheet: Sick Leave (General Information) If you resign without retirement eligibility, the balance simply disappears.
The practical point: if you are close to retirement, spending down your sick leave before you go costs you annuity dollars for the rest of your life. Keeping it on the books is worth more than any cash equivalent would be.
If You Return to Federal Service
Come back to a federal job before your lump-sum projection period runs out and you owe money back. You refund the portion of the payment covering the period from your re-employment date through the end of the original projection, calculated on the same pay figures used in the original computation, not the net you actually received. The agency can accept installments but cannot waive the debt, and full repayment must happen within one year. The leave hours covering the refunded period get recredited to your account. Restored leave under 5 U.S.C. 6304(d) that was paid in the original lump sum is not refundable and is not recredited.13eCFR. 5 CFR 550.1206 – Refunding a Lump-Sum Payment
The cash flow hit can be significant, because you refund the gross while you only banked the net.
Verifying Your Balance
Your Leave and Earnings Statement is the primary record of hours on the books. Save your final LES before your last day. It shows both your regular annual leave balance and any restored leave in its separate account. Compare those figures against what your agency uses to calculate the payout.
Your SF-50 documents the separation date, grade, step, and salary that feed the projection.14U.S. Office of Personnel Management. Guide to Processing Personnel Actions – Chapter 31: Separations by Other than Retirement15Department of Commerce. Guide to Understanding Your Notification of Personnel Action Form, SF-50 If the salary shown is wrong (a missed within-grade increase, for instance), raise it before you leave. The SF-50 should reflect what you were entitled to on your last day.
When the Money Arrives
OPM’s guidance warns that the lump-sum payment “may take several months” while offboarding and leave account audits work through.16U.S. Office of Personnel Management. Fact Sheet: Lump-Sum Payments for Annual Leave Some agencies are faster, and some retirees see payment within one to two pay cycles, but there is no guaranteed timeline.17U.S. Office of Personnel Management. Frequently Asked Questions – When Will I Be Paid for Unused Annual Leave? Budget for the longer end.
The payment shows up as a separate transaction from your final paycheck, usually by direct deposit to the account on file. Close that account and a paper check goes to your last known mailing address. Update both before your last day if anything has changed.
If DFAS pays you, set up a myPay login with a personal email and password before you go. Your CAC or PIV card stops working at separation, and myPay is how you retrieve your W-2 and any corrected tax documents. DFAS keeps separated employees’ access active for 15 months.18Defense Finance and Accounting Service. Preparation for Military or Civilian Employee Separation
Effect on Unemployment Benefits
If you are separated involuntarily and plan to file for unemployment, know that the lump-sum payout can affect the timing or amount of your benefits. Unemployment insurance is a state program, and states handle these payments differently. Some treat the lump-sum projection period as continued employment and delay benefits until it ends. Others require you to report the payment without reducing your benefit. Ask your state unemployment office how they will treat it before you file.