Human Resource Blog

vacation time

I have an employee who quit on 12/19/09 and gave 2 weeks notice he may stay 3. He has been with us for over 3 years and our policy is that all vacation/sick time will be paid to the employee at the end of the year if not used. He gets a total of 3 weeks vacation & sick time and effective 1/1/10 he would start over again and get his three weeks. In as much as he quit in 2009 and we will be going into the new year am I obligated to pay him those three weeks pay for 2010.

If you permit the employee to continue working after January 1, yes, you will be obligated to follow company policy and pay out both vacation for 2009 and 2010. You could avoid this by terminating the employee before January 1, 2010, but in some cases that would make him eligible for unemployment benefits. If he is quitting to go to work elsewhere, presumably that will not be an issue.

You do not say which state you are in, but in any state except California, this vacation policy is exceptionally generous — even foolishly generous. The employee figured out how to play the system, and timed his departure perfectly to collect multiple weeks of vacation and sick pay.

This is an excellent opportunity for you to revamp the company vacation policy. Paying out for unused vacation at the end of the year is very, very generous — adding sick leave to it is excessive.  Unless you are required to make this payment by law, you need to change company policy — perhaps by prorating the amount of vacation paid at termination depending upon the poriton of the year worked, and/or limiting the total vacation payout at termination.

Inform employees in writing of the new policy. While it may not affect this employee, it will prevent future problems.

More than 90% of employers outside California do not pay for unused sick leave at termination.