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Prorating Vacation

I need to prorate vacation time for an employee. His hire anniversary date is July 1st. He earned 168 hours. He retired in December so he worked 6 months with a balance of 144 hours left. How much vacation time should he be paid? Thanks.

You say the employee has a balance of 144 hours. If this is time the employee has accrued/earned then this is what should be paid out to him. But, if the employee hasn’t earned the time yet (i.e. it was given to him as a lump sum on his anniversary date), then the vacation time to be paid out must be prorated.

Let’s say employees receive 2 vacation weeks per year. Two weeks vacation per year calculates to 80 hours of vacation time (assuming employees work 8 hours a day, five days a week). Divide total number of vacation hours (80) by number of weeks in a year (52) = 1.538 hours of vacation earned per week.

If employees receive their vacation in a lump sum on their anniversary date, then the employee in question would only be entitled to the vacation time earned from July 1, 2016 to his last day worked, let’s say December 31, 2016, or 26 weeks worth of his vacation entitlement.

Hours of vacation earned per week (1.538) x weeks of vacation entitlement (26) = 39.98 hours of vacation. So, the employee would’ve earned 39.98 hours of his vacation allotment by December 31st. Any vacation time taken during the plan year would be deducted from this.

Keep in mind that there is no federal law regulating the administration of vacation benefits for private employers. However, several states have adopted such regulations. So, make sure you’re aware of any applicable state laws. Some states, most notably California, require employers to pay out all earned unused vacation time to employees upon separation.


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