During the last few weeks of the year many employers will be inundated with employee requests to carry over unused vacation days into 2009. Employees eligible for a calendar year vacation benefit will realize on Monday, December 15th that they have 17 remaining vacation days that they will not be able to take before year end. No problem, the boss will let them use them in 2009. This is how employees end up with 62 unused vacation days!
The employee with 62 vacation days earned over 12 years of employment is never going to be able to take this much time off. They never seem to be able to take the vacation they earn each year. One day they resign and you owe them three months of vacation pay; the 4 weeks they earn for the year and the 62 days they never took. Wait until the CFO sees the request for three months of pay for an employee who quit.
Do you have to pay out all of that unused vacation to the departing employee? In some states employers are required to pay unused and even accrued vacation. In others it has to be paid out unless there is a clear written policy or an agreement by employees that they forfeit unused and accrued vacation when they resign. Check with your state’s department of labor to find out the applicable requirements.
If you can tighten up the policy for paying out vacation after employment ends you still need to deal with all of those unused days. I did not dream up the 62 day figure. I have worked with employers where more than one employee had accumulated vacation banks of this size, and larger.
There are a few different ways to tackle these mounting vacation allotments. Employers can buyout some or all of the days and start fresh. Another option is to convert some vacation days into hospital or disability days that can be used to cover outpatient procedures and augment and disability plans. Finally employees can be offered the option to donate days into a bank to be used by employees facing serious illness or extraordinary family difficulties who run out of paid time off. In using any of these solutions make certain you don’t run afoul of state law.
The best strategy is to not allow huge vacation carryovers in the first place. Set a policy, within applicable state law, that requires employees to use or lose vacation. If you must allow carryover days identify strict maximums and deadlines to take the time off. If the problem is huge look at your vacation policy, not to mention work life balance. Is the vacation amount realistic? Should you move to a paid time off policy to allow employees to use the days for multiple reasons? What strategies have you used to successfully manage vacation allowances?