What are Voluntary Separation Incentive Payments?

A Voluntary Separation Incentive Payments (VSIP), also referred to as a buy-out, is a lump-sum payment made to eligible employees who separate through resignation, optional retirement, or early retirement. As reflected in its official title, a decision to take a VSIP must be voluntary.

VSIP allows organizations to reskill, modernize, restructure, and realign their workforce. VSIP can be used alone or together with Voluntary Early Retirement Authority (VERA) to incentivize employees to leave voluntarily, to avoid or lessen the impact of involuntary reductions that are necessary due to known budgetary shortfalls, and/or to address positions that are no longer needed due to mission changes or different skill requirements. To receive approval to use these authorities, the Department of Commerce must make requests for specific offices and bureaus to the Office of Personnel Management (OPM). VSIP requests also require Office of Management and Budget (OMB) review.

The VSIP Authority, also known as buyout authority, allows bureaus/OUs that are downsizing or restructuring to offer employees lump-sum payments up to $25,000 as an incentive to voluntarily separate. When authorized by OPM, a bureau/OU may offer VSIP to employees who are in surplus positions or have skills that are no longer needed in the workforce, and they volunteer to separate by resignation, optional retirement, or by voluntary early retirement if approved. By allowing employees to volunteer to leave the Federal Government, bureaus/OUs can minimize or avoid involuntary separations using costly and disruptive Reductions in Force (RIFs). 

The Department must request VSIP and receive approval from OPM before it may offer incentive payments to its employees. The approval from OPM will stipulate a period during which VSIP will be available. When the Department has received approval from OPM to offer VSIPs, any employee who meets the general eligibility requirements may apply for the VSIP.

Who is eligible for a VSIP?

All employees who receive an employee notice (announcing that a VSIP period will be offered) and who meet the requirements below are eligible to apply.

To be eligible to separate with a VSIP, an employee must: 

• Be serving under an appointment without time limitation;
• Be currently employed by the Executive Branch of the Federal Government for a continuous period of at least 3 years;
• Be serving in a position covered by an agency VSIP offer;
• Apply for and receive approval for a VSIP from the agency making the VSIP offer; and
• Not be included in any of the ineligibility categories listed below.

Employees in the following categories are not eligible for VSIP. Employees who:

• Are reemployed annuitants;
• Have a disability such that the individual is or would be eligible for disability retirement;
• Are in receipt of a decision notice of involuntary separation for misconduct or unacceptable performance;
• Previously received any VSIP from the Federal Government;
• During the 36-month period preceding the date of separation, performed service for which a student loan repayment benefit was paid, or is to be paid;
• During the 24-month period preceding the date of separation, performed service for which a recruitment or relocation bonus was paid, or is to be paid; or
• During the 12-month period preceding the date of separation, performed service for which a retention bonus was paid, or is to be paid.

How is the dollar amount of a VSIP computed?

The VSIP payment is equal to the amount that employees would be entitled to receive as severance pay, or an amount not to exceed $25,000, whichever is less. Severance pay is paid for involuntary separations. Since leaving the agency to take a VSIP is a voluntary action, employees are not eligible for both severance pay and VSIP.

What is the repayment requirement for a VSIP?

It is important for employees to understand that if they take a VSIP, they cannot return to work for the Federal government for 5 years. If they do return before that time, they must repay the gross amount of the VSIP before their first day of reemployment. To illustrate this point, if an employee receives a $25,000 VSIP, taking home $18,000 after taxes and withholdings, the employee must repay the entire $25,000 before reporting to work at Commerce or the new agency. Employees are also responsible for settling the overpayment of money withhold (i.e., state and local taxes, FICA) with the proper agency after repayment is made.

Can the repayment requirements be waived?

Yes. The Director of OPM may, at the request of the head of the Department, waive the repayment if:

1. The proposed reemployment is with an executive branch agency;
2. The individual involved possesses unique abilities and is the only qualified applicant available for the position; or
3. In case of emergency involving a direct threat to life or property, the individual:
   1. Has skills directly related to resolving the emergency; and
   2. Will serve on a temporary basis only as long as the individual's services are made necessary by the emergency.

How are VERAs and VSIPs related?

The Voluntary Early Retirement Authority (VERA), also referred to as an early-out, and VSIP are two different types of incentives that can be used to offset the impact of involuntary separations or reorganizations. A VERA allows an employee to opt to retire before meeting the normal age and years of service requirements. A VSIP is a lump-sum payment made to eligible employees who voluntarily separate through resignation, optional retirement, or early retirement. Depending on individual circumstances, some employees may be eligible for, and receive, either, or both incentives.

Where is the VSIP Template?

https://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-separation-incentive-payments/vsip-request-template.pdf.

Updated March 2025.