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Accrued vacation

Our policy states that an employee will receive one week vacation after one year of employment. If that employee quits at month 11 would he be entitled to any vacation benefit payout? He gets no benefit payout at month 11, is that correct?

You do not mention which state the employee is in, and it makes a huge difference.

In most states you are correct. Vacation need not be prorated. If you give 40 hours of vacation after 12 months, an employee who quits after 6 months is not entitled to 20 hour of vaction pay. He is entitled to 0 hours of vacation pay. This is true even if the employee quits one day before he would have been awarded the vacation time.

Even in states like Illinois and Louisiana that require employers to pay workers for earned vacation upon termination, the employee is only entitled to payment for vacation time that he was eligible to use, under company policy, on his last day of work. Any vacation that is accrued but not earned — that is, that the employee is not entitled to use — need not be paid.

However, California and possibly a few other states have different laws. They require that employees be paid for any accrued vacation. Search our archives for info on your state, or post another question that mentions the state, for more info.

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This entry was posted on Friday, January 23rd, 2009 at 9:39 am and is filed under
Human Resources Management, Termination.
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2 Responses to “Accrued vacation”

  1. GINNIE Says:

    Where can I find a list of what states require accrued vacation to be paid out at time of termination? Is there any place to go to find out if states care if it is called PTO instead of vacation as long as it is accrued is it the same law.

  2. Caitlin Says:

    Hi Ginnie!

    As far as we know, there is no comprehensive list of states that require vacation payouts at termination. And believe us, we’ve searched many times!

    Our best suggestion: search our archives for each state you are interested in, such as “Iowa vacation.” You should find at least one article for each state. If not, feel free to post a question on that state.

    Part of the problem is that every state has its own, unique laws regarding vacation payout. So even if two states both require it, the laws can be very different.

    Some states do, indeed, care if it is called PTO rather than vacation. I believe that only California requires employers to pay for all PTO at termination. In most other states, the employer must pay for the portion of PTO that is comparable to vacation, but not for any portion comparable to sick leave or personal leave. HTH, and thanks for reading the blogs!~ Caitlin

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