The carrot half of the carrot-and-stick formula for cutting federal jobs would be sweetened under a proposal the Trump administration has sent to Congress, seeking to increase the maximum value of buyout payments from $25,000 to $40,000 government-wide.
Buyouts are payments used for “increasing voluntary attrition in agencies that are downsizing or restructuring,” in the words of the proposal, and reduce the need to use the stick side of the equation — the complex and contentious layoff process called reduction in force.
A buyout is the lesser of $25,000 or the severance pay the employee would be due if laid off — as a practical matter, it’s usually the former. The payment is taxable, reducing its value typically to under $20,000, and employees who accept one generally must repay the full amount if they return to government employment within five years.
The $25,000 figure has been the same since the government first started offering buyouts during the workforce downsizing in the Clinton administration. Last year the Defense Department asked for a boost to $40,000, arguing that $25,000 is no longer a sufficient incentive to get employees to resign or retire voluntarily. Congress agreed to the increase, but only at that department and only through September 2018.
The new request, also sent to Congress by the Pentagon, would increase the amount permanently and government-wide, and then adjust it for inflation.
Using the formal government term for buyouts, voluntary separation incentive payment (VSIP), the request says that “Adoption of the proposal would initially increase the maximum VSIP amount from $25,000 to $40,000 for buyouts paid to avoid involuntary separations during periods of personnel reductions. For each year thereafter, the $40,000 cap would be adjusted according to the consumer price index. It will not change the severance pay formulas used to calculate the actual VSIP amount.”
The proposal was among a recent set of requests for the annual defense budget, which has passed the committee level in both the House and Senate and is pending on the House floor this week. That bill sometimes is used as the vehicle for changing personnel policies that apply in all agencies.
Relatively few buyouts — about 2,000 to 3,000 a year — have been paid in recent years, but interest in them has increased as the Trump administration has pushed several initiatives to downsize the federal workforce, starting with imposing a general hiring freeze soon after taking office. Although that freeze was later lifted, many agencies are continuing to restrict hiring in anticipation of spending restrictions the White House has proposed for the budget year that starts in October that could translate into job cuts.
The administration, meanwhile, has ordered agencies to review their operations for greater efficiency, with formal proposals to be sent to the Office of Management and Budget in September. An OMB memo issued last week told agencies to continue to expect tight budgets and that the plan to be proposed early in 2018 “will provide an opportunity to present a comprehensive plan for reforming the Federal Government and reducing the Federal civilian workforce.”
Buyouts commonly are paired with offers of early retirement, in which employees may retire sooner than under the standard age and years of service combinations. Agencies other than the Defense Department must get permission from the Office of Personnel Management to offer either kind of incentive. An earlier OMB memo said that OPM “will provide expedited reviews for most requests within 30 days.”
The agencies decide how many offers they will make and can tailor them by occupation, work unit, location or other factors not personal to an individual. Employees who are eligible typically must decide within a matter of weeks whether to accept.
The Environmental Protection Agency has announced plans to offer both types of incentives as soon as the upcoming weeks, while the Interior Department has said it would “rely on a combination of attrition, reassignments, and separation incentives” to carry out its plan to shed some 4,000 jobs, about 8 percent of its workforce.