The amount of severance pay an employee receives is computed on the basis of the employee's basic pay at the time of separation, the number of years of creditable Federal service, and the age of the employee if over 40.
The formula works like this: First, the basic allowance is computed on the basis of one week's basic salary for each full year of creditable service through 10 years plus two week's basic pay for each full year of creditable service beyond 10 years. No credit is given for service in the Armed Forces unless it interrupts otherwise creditable civilian service. If the employee is over 40 years of age, an age adjustment allowance is added, consisting of 2.5% of the basic severance pay allowance for each three full months s/he is over 40, or 10% of the basic severance pay allowance for each full year.
Normally, severance pay is paid through a series of payments aligned with the employee's biweekly pay periods prior to separation. The Department of Defense also has the authority to grant, upon the employee's request, payment of severance pay in one lump sum. When an employee takes the lump sum and then returns to work before the time s/he would have stopped receiving biweekly payments if severance pay had been paid normally, s/he must repay a portion of the lump sum. The amount to be repaid equals the amount of severance pay applicable to the period from the start of re-employment to the end of the severance pay calculation period.
The total amount of severance pay is limited to one year's salary. If an employee receives severance pay for a time, then returns to Federal employment and is separated again, the employee is entitled to further severance pay but not to exceed a combined period of one year. This is a lifetime limitation.
Entitlement to severance pay ends when the individual is appointed to the Federal Government under a qualifying appointment, or the severance pay fund is exhausted, or the employee has received one year of severance pay.