Background
The Office of Personnel Management (OPM), under Director Scott Kupor, is modernizing federal HR as part of President Trump’s transformation effort. Recently, OPM has revised administrative leave policy, revised hiring practices, and employee performance plans. However, one area that OPM should consider improving is the annual leave benefits offered to federal employees. This whitepaper proposes two improvements:
- More flexibility in donating annual leave
- Addition of year-end cash-out option
More Flexibility in Donating Annual Leave Outside Medical-Related Issues
Current Policy:
Federal employees can donate leave to colleagues only for medical-related matters through formal donation request form.
Proposed Change:
Allow federal employees to donate leave for any valid reason, not just medical-related matters. For example, new federal employees who may not have enough annual leave saved could receive donated leave for use.
What Are the Potential Benefits:
- Expands colleague support beyond medical-related matters, while reducing potential stress.
- Federal employees with enough leave balance have a new option to donate.
- Federal employees with more than 240 annual leave hours (e.g., current calendar year-end use-or-lose threshold for most federal employees) can donate excess leave before forfeiture by the end of the last year pay period of the calendar year.
- Potential recipients gain flexibility without depleting future leave balances through advance leave requests, while also minimizing administrative burdens for tracking advanced leave balances.
Year-End Cash-Out Option
Current Policy:
Most federal employees with excess annual leave (240+ hours) must use it or lose it by year-end or the last pay period of the calendar year. No compensation is provided for forfeited leave and carry-over excess leave requires higher level review and approval resulting in more administrative burden.
Proposed Change:
Allow federal employees to cash out excess leave above 240 hours.
Implementation:
- Use the current November deadline for submitting Use or Lose annual leave to allow for federal employees to opt for cash-out.
- New option allows for employees choose to either 1) use excess leave OR 2) convert excess leave to cash. It should be noted that a third option could be available as federal employees could donate excess leave to other federal employees (see previous section about donating annual leave).
- Federal employees who elect the cash-out option will have the allocated leave transferred to an electronic payment to avoid potential double-dipping of excess leave (prevents double-dipping).
What Are The Potential Benefits:
- Federal employees retain value from earned leave instead of losing it entirely.
- Minimizes potential administrative burden to restore or carry over excess annual leave to the next calendar year due to urgent mission-critical work.
- Provides more flexibility in options for the federal employee.
- Further modernizes the federal workforce benefits.
Conclusion
These two policy changes align with OPM’s broader modernization efforts and deliver immediate value to federal employees. By expanding leave donation eligibility and creating a cash-out option, OPM can reduce administrative burdens, while providing 21st-century benefits flexibility.
We recommend that OPM consider implementing these changes as part of ongoing benefits modernization. Ideally, it would be advantageous to OPM and the administration execute these changes before the end of calendar year 2025 as part of the reopening of the federal government. Please email us at info@ccompliancegroup.com for questions, comments, concerns, or need for clarification about improving federal employee annual leave benefits.