Voluntary Separation Incentive Payment

A Voluntary Separation Incentive Program (VSIP) is a financial incentive offered to employees to encourage them to voluntarily separate from their employment, often used by organizations during downsizing or restructuring. It's essentially a buyout package that incentivizes employees to leave their jobs.

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Voluntary Separation Incentive Payments Description

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Voluntary Separation Incentive Payment (VSIP) Authority, commonly referred to as buyout authority, enables federal agencies undergoing downsizing or restructuring to offer eligible employees lump-sum payments of up to $25,000 as an incentive to voluntarily separate from service.

When authorized by the Office of Personnel Management (OPM), an agency may provide VSIPs to employees in surplus positions or those whose skills are no longer required. Eligible employees may separate through:

• Resignation
• Optional Retirement
• Voluntary Early Retirement (if approved)

By encouraging voluntary departures, agencies can minimize or avoid involuntary separations, such as costly and disruptive Reductions in Force (RIFs).

Key Points:

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• OPN Approval Required (Unless Exempt): Most agencies must obtain OPM approval before offering VSIPs, though some (like the Department of Defense) have agency-specific authority and do not need OPM clearance.

• Targeted Workforce Reduction: VSIPs help reshape the workforce by incentivizing voluntary exits rather than forced layoffs.
• Flexible Separation Options: Employees may leave through resignation, regular retirement, or early federal retirement (if eligible).

This authority provides a cost-effective and less disruptive alternative to RIFs, allowing agencies to align staffing with mission needs while offering employees a financial incentive to transition out of federal service.

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Employee Coverage for Voluntary Separation Incentive Payments (VSIP)

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The VSIP (buyout) authority applies to federal civilian employees who meet specific eligibility criteria set by their agency and the Office of Personnel Management (OPM). However, not all employees are automatically eligible—coverage depends on workforce needs, position status, and agency authorization.

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Eligible Employees

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Employees who may qualify for a VSIP include those:

• In surplus positions (roles being eliminated or reduced).
• With skills that are no longer needed due to restructuring or mission changes.
• In occupations or locations targeted for downsizing.
• Who voluntarily separate through:

Resignation

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• Optional (regular) retirement
• Voluntary early retirement (if approved under VERA—Voluntary Early Retirement Authority)

Exclusions & Restrictions

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Certain employees are typically ineligible for VSIPs, including:

• New hires (often those with less than 3 years of service).
• Employees in critical positions that cannot be vacated.
• Those who have previously received a VSIP or separation incentive.
• Employees already under termination notices (e.g., for misconduct or poor performance).
• Reemployed annuitants (in some cases).

Agency-Specific Variations

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• Some agencies (like the Department of Defense) have permanent VSIP authority and do not need OPM approval.
• Others must request OPM authorization before offering buyouts.
• Eligibility rules may vary by agency based on workforce needs.

Reemployment Restrictions

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• Employees who accept a voluntary separation incentive payment may face reemployment bans with the federal government (typically 12 months–5 years, depending on agency policy).
• Computation of Incentive Payment

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Discretionary Authority in Voluntary Separation Incentive Payments (VSIP)

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The decision to offer VSIPs (buyouts) is discretionary—agencies are not required to provide them, even if they are authorized to do so. The use of VSIPs depends on agency needs, budgetary constraints, and strategic workforce planning.

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VSIP (voluntary separation incentive plan) Repayment Requirement: Key Provisions

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An employee who accepts a voluntary separation incentive payment vsip (VSIP) must repay the full amount if they return to federal employment or certain contracted roles within 5 years of separation. Below are the critical details:

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1. When Repayment Is Required

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Applies to: Any compensated federal reemployment, including:

• Civilian positions in any agency.
• Work under a personal services contract or direct federal contract.
• Trigger: Reemployment begins before the 5-year restriction period ends.
• Deadline: Full repayment must be made before the first day of reemployment.

2. Exemptions (No Repayment Needed)

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Reemployment with these entities does not trigger repayment:

• Government Accountability Office (GAO)
• United States Postal Service (USPS)
• Postal Regulatory Commission (PRC)

3. OPM Waiver Authority

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The Director of OPM may waive repayment only if all the following apply:

• The reemployment is with an executive branch agency (not legislative/judicial).
• And at least one of these conditions is met:
• Unique Abilities: The individual has rare, critical skills and is the only qualified applicant available.
• The role addresses a direct threat to life or property (e.g., disaster response).
• The employee’s skills are essential to resolving the emergency.
• Employment is temporary (lasts only as long as the emergency).

4. Process for Repayment or Waiver

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Repayment:

• The employee must return the gross (pre-tax) voluntary separation incentive plan amount upfront.
• If unpaid, the agency may deny employment or take debt collection actions.

Waiver Request:

• The agency head must submit a justification to OPM.
• OPM evaluates based on critical need and public interest.

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Who is Eligible for a Voluntary Separation Incentive Payment)?

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Employees who receive official notification that a voluntary separation incentive plan period is being offered and who meet the following criteria are eligible to apply:

Eligibility Requirements

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To qualify for a VSIP, an employee must:

• Be serving under a permanent (non-temporary) appointment;
• Have been continuously employed in the Executive Branch of the Federal Government for at least 3 years;
• Occupy a position included in the agency's current voluntary separation incentive payment offering;
• Apply for and receive formal approval for the VSIP from the offering agency;
• Not fall under any of the ineligibility categories listed below.

Ineligibility Criteria

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Employees are not eligible for a VSIP if they:

• Have a medical condition that qualifies or would qualify them for disability retirement;
• Have received a notice of involuntary separation due to misconduct or poor performance;
• Have previously received a VSIP from any federal agency;
• Have received (or are scheduled to receive) a student loan repayment benefit for work performed within the 36 months before separation;
• Have received (or are scheduled to receive) a recruitment or relocation bonus for work performed within the 24 months before separation;
• Have received (or are scheduled to receive) a retention bonus for work performed within the 12 months before separation.
• Are reemployed federal annuitants;

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How are VERAs and VSIPs related?

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The VERA VSIP Voluntary Early Retirement Authority (VERA) and the Voluntary Separation Incentive Payment (VSIP) are both tools used to support workforce restructuring and reduce the need for involuntary separations.

While they serve different purposes, they are often offered together during organisational changes. VERA, also known as an "early-out", allows eligible employees to retire before meeting the standard age and service requirements. In contrast, VSIP is a one-time lump-sum payment offered to employees who voluntarily leave the organisation—whether through resignation, optional retirement, or early retirement.

In some cases, employees may qualify for both VERA and VSIP, depending on their individual situation. Together, these incentives help manage workforce transitions more smoothly and with minimal disruption.