The Defense Department could dangle a much larger cash carrot before its employees to induce them to resign or retire, under a budget bill up for Senate voting this week.
The bill would grant the Pentagon’s request to increase the maximum “voluntary separation incentive payment” — more commonly known as a buyout — from $25,000 to $40,000.
A report released Monday by the Senate Armed Services Committee says the “increased maximum amount would adjust for inflation from when VSIP was first authorized for the Department of Defense in 1993.”
The increase apparently would apply only at that department, rather than government-wide. However, the department accounts for more than a third of executive branch employees outside the independent U.S. Postal Service.
Buyouts first were used in the government during the 1990s as agency workforces shrank overall, in order to avoid the complex and often costly government layoff process known as a reduction in force. Offers are made at an agency’s discretion; an employee has no right to claim one unless offered.
The offers have been less common since then, although agencies still sometimes use them when reducing or reshaping parts of their workforces.
The Defense Department has permanent authority to offer buyouts for either downsizing or reorganizing. Other agencies may offer them in reorganizations with approval from the Office of Personnel Management, while approval from Congress is generally required to use them in downsizing.
Buyouts can be offered to employees regardless of whether they are eligible to retire, although in practice most of them are carried into retirement. Commonly buyouts are paired with offers allowing retirement earlier than under normal rules, with a reduction in benefits in some cases.
Most employees who are offered buyouts are eligible for the maximum amount, which is the lesser of $25,000 or the amount they would be due in severance pay if laid off.
DoD recently proposed the increase as part of a wide-ranging set of requests for its budget for the fiscal year that starts in October.
“While $25,000 was considered an appropriate amount to induce employees to voluntarily separate in 1993, it cannot possibly provide the same incentive in current dollars. Employees are clearly influenced by prevailing economic conditions when making financial decisions,” it said in its request.
It said the maximum today would have to be $42,750 to mirror increases in federal pay since that time, and to keep pace with inflation it would have to be $47,250.
That proposal projected that DoD would offer about 6,000 buyouts per year each of the next five years, two-thirds of them in the Army.
“The recent announcements of anticipated reductions to the DoD budget over the next few years require management to efficiently reduce the workforce while not adversely affecting the mission and the Department’s commitment to support our warfighters. Buyouts provide a less expensive, more humane, and more manageable way to efficiently reduce and restructure the workforce,” it said.
The House earlier passed its own version of the defense budget without a similar increase.
Both bills contain numerous more minor changes in personnel policies. Many of them are designed to aid hiring into hard-to-fill positions or to incentivize employees to take long-term or potentially dangerous temporary assignments.