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Nov22

Vacation Pay

Is it lawful to pay an employee their old rate of pay on accrued vacation (at the time they take it) if when they accrued it they were at a lower rate of pay? This question pertains to an exempt employee.

The federal Fair Labor Standards Act (FLSA, which establishes compensation guidelines for employees, doesn’t mandate employers to provide employees with paid time off including vacation time. Some states have adopted such legislation.

However, of those states, many simply require employers to abide by their own established practices and policies. Still, it’s important to be aware if your state has any such laws. Feel free to post a comment below with the state listed. We can then research any applicable laws for you.

Absent state law, collective bargaining agreement or employment contract stating otherwise, employers are permitted to pay an employee’s vacation time in the wage amount the vacation time was actually earned, not necessarily the employee’s current wage, as long as state and federal minimum wage requirements are met.

It’s more common and less of an administrative burden to simply pay the vacation time at the employee’s current wage.

Any rules regarding vacation pay should be communicated to employees at the time of hire or at the time they become eligible for such benefits. Keep in mind, such notification is not required in every state; however, it’s still advisable.

This entry was posted on Sunday, November 22nd, 2015 at 12:57 pm and is filed under
Benefits, Compensation.
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