Pension spiking, sometimes referred to as "salary spiking", is the process whereby public sector employees are granted large raises, bonuses, incentives or otherwise artificially inflate their compensation in the time immediately preceding retirement in order to receive larger pensions than they otherwise would be entitled to receive. This artificially inflates the pension payments due to the retirees.
Upon retirement any employee transitions from receiving a paycheck from the employer to a pension check drawn on the assets of the retirement fund; this amount is typically determined as a percentage of the employee's regular salary by state law or statute. When an employee due to retire receives a "spike", the amount of money the employee will receive does not reflect the percentage of salary the employee and employer haves contributed for the majority of the employee's career, and places a burden on the economic viability of the pension fund. This practice is considered a significant contributor to the high cost of public sector pensions.