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Oct30

Prorated Vacation upon Termination

Policy states an employee who is entitled to 80 hours of annual vacation but has not used any and is terminated on 190th day from anniversary date would be entitled to 42.00 hours of unused time. 190/365=52% of 80 = 42.00. But what if the employee used some vacation, say 56 hours and had 24 hours left. Would he be entitled to any of the 24 hours that is left? If so, how would that be calculated?

Unless the vacation policy is under a collective bargaining agreement or employment contract, employers are able to adopt a vacation policy of their choosing. In doing so, employers must ensure that vacation policies are clear and easily understood.

The above policy is not clear. It says if the employee has not used any time he will be entitled to 42 hours at termination. This can be read as the employee must not use any vacation time whatsoever in order to receive 42 hours paid out at termination. This doesn’t appear to be to what you mean. You, as the employer, must determine what exactly will be paid to employees at termination and the policy must be updated as appropriate. It’s much less of an administrative burden and much less confusing to pay out any accrued but unused vacation time. However, if you decide to use a calculation method, you must determine the method and apply it uniformly.

An employer is permitted to impose certain restrictions or conditions regarding vacation payout. Keep in mind that some states impose guidelines on vacation payout at termination. Thus, employers must consider applicable state legislation prior to adopting a vacation policy.

This entry was posted on Thursday, October 30th, 2014 at 11:54 am and is filed under
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