Provide Incentives to Encourage Voluntary Separations

Provide Incentives to Encourage Voluntary Separations

Background

Throughout the federal government, departments and agencies are being
asked to work more efficiently, that is, with fewer resources. To
achieve this goal, many organizations are facing potentially massive
restructuring and downsizing. Incentives are needed to encourage
voluntary separations, thereby reducing or eliminating the need for
relocating, reassigning, or separating employees under reduction in
force procedures.

Need for Change

According to the Office of Personnel Management (OPM), voluntary early
retirements among eligible employees have dropped from approximately 17
percent in the mid-1980s to 4 percent in 1992.  After remaining
relatively constant at approximately 36 percent during the same time
period, regular optional retirements dropped to 23 percent in 1992.(1)
Overall attrition from federal service is at its lowest level since
1973, when OPM began tracking these data.

The federal government's recent experience with separation incentives
suggests that a large percentage of employees will choose regular or
early retirement if incentives are included.  The Office of Thrift
Supervision (OTS) and the U.S. Postal Service (USPS), in 1991 and 1992,
respectively, offered lump sum payments equivalent to six months' salary
to persons eligible for either early or regular retirement. In OTS, 38
percent of early retirement and 53 percent of regular retirement
eligibles accepted the offer. In USPS, 27 percent of early retirement
and 43 percent of regular retirement eligibles accepted. In 1993,
Department of Defense (DOD) employees were offered the lesser of $25,000
or the amount the employee would otherwise be entitled to receive as
severance pay. About 20 percent of early retirement eligibles and 40
percent of regular retirement eligibles have retired from DOD
recently.(2)

Cross References to Other NPR Accompanying Reports

Improving Financial Management, FM13: Charge Agencies for the Full Cost
of Employee Benefits.

Transforming Organizational Structures, ORG01: Reduce the Costs and
Numbers of Positions Associated with Management Control Structures by
Half; and ORG02: Use Multi-year Performance Agreements between the
President and Agency Heads to Guide Downsizing Strategies.

Endnotes

1. Office of Personnel Management, "Retirement Trends With and Without
Incentives: Summary Through July 30, 1993," p. 1.  (Unpublished.)

2. Ibid., pp. 1-3.