Treatment of unused vacation when leaving

[Finance Dave]

As you may see in my other thread, I may be leaving my company in 2012...although not officially retiring. I currently have earned 5 weeks of vacation each year.

I'm trying to determine the best strategy for maximizing my benefits while doing the ethical and honest thing.

Let me give the extremes first.

1) I work Jan 2, 2012 until June 30 (random date), don't take any vacation during that time, then tell my manager "I'm giving my two weeks notice"....then wo*k the final two weeks, and leave. I've just given up 5 weeks of paid vacation that I'd earned.

2) On the other extreme, let's say I tell my boss in late December..."I'm going to take the first 5 weeks of the year off for vacation", so I'll be in on Feb 15th. Then I come in on Feb 15th, give my two weeks notice, and wo*k those two weeks, then leave.

Now you can see my question...what are my options in between those two? Obviously there are a myriad of ways to do this...but I think if I say to them "I'm planning on leaving in x weeks, but I plan to take all my vacation first", they could simply let me go at that time.

I've been treated well by my company, so I'm not looking to take advantage of them...but then again I've earned the vacation and want to leave on good terms...so I'm trying to strike the right balance. I doubt (although I certainly could ask or negotiate) they would pay me for unused weeks upon leaving. Obviously I cannot even ask this until I actually notify them...as they have no idea I'm considering this.

What are your thoughts?

 

[travelover]

I got paid for my unused vacation when I retired. Is this an option?

 

[mystang52]

If your company has an employee handbook it may address unused vacation time when an employee leaves. If it says they pay unused time, that is a binding contract. If there is no handbook or other expressed policy, and you think it very likely they won't pay you, why not start whittling down that vacation time, now?
Take a week here, several long weekends there, plus a 2-week vacation, etc. Then give your notice after you have no more accrued time. There is nothing unethical in this approach, since you're only taking what you have already accrued. I find it interesting, though, that you're concerned about ethics when you feel your company would be UNethical and not pay you accrued vacation time (employee handbook or no).
Incidentally, I know my company will not pay accrued time, and I will employ the above strategy. A fringe benefit of this is that you will have a nice transition to full retirement because of the days off you will be taking in your last period of employment.

 

[pb4uski]

Most companies would include any unused vacation in your final paycheck, but as other posters have advised, check into what your company's policy is.

Another possible approach is to indicate that you are resigning effective June 30, but your last day of work will be May 23 and you will be on vacation from May 24 to June 30.

Given the relationship you describe between you and your employer it sounds like you should be able to work out something that allows you to get the benefits that you have earned in a way that is mutually agreeable.

If neither of those are options with your employer and you would lose your accrued vacation if you leave, then by all means use it between now and when you resign.

 

[ChiliPepr]

Every state has different laws about unused vacation. I would do a google search for: "unused+vacation"+"your state here".

I know that where I work, you basically get the days you accrue. In other words, if you get 25 days and you leave on June 30th, you accrue 12.5 days. If you took 10 days before you left, they add to your final check pay for the additional the 2.5 days. If you used 15 days the subtract the equiv of 2.5 days from your final check.

Those are the office rules here, more than likely in the second case the do not do that and let you "keep" the additional days without clawing back. Really depends on how you are leaving.

As Mystang said, check your companies handbook if they have one...

 

[martyb]

I intend to get paid for at least 240 hrs of vacation time when I retirein 16 months. That's the least I'll have if I retire exactly on my planned date (date I'm first eligible). If (not likely) I were to decide (for some ungodly reason) to work longer than that, say for another year, I could sell back up to a max of 448 hrs. That would give me a nice little going away stash, but I don't think I want to do the extra time to get it. Most likely, I'll just be satisfied with the 240 hrs, which would be about $7600 before taxes. Any unused sick leave will be added to my final pension calculation but I won't have enough to make much of a difference.

 

[scrabbler1]

I had a weird thing happen in this area when I ERed 3 years ago.

In 2007, I reduced my total weekly hours worked from 20 to 12 which made me ineligible for most fringe benefits including vacation time. Because I made this switch in the middle of the year, I could use whatever VA time I had accrued (and I had used all of it already) but could accrue no more time according to the employee handbook.

This was further confirmed in the company's intranet which we used to enter our timesheet info for payroll purposes. So when when 2007 ended and 2008 began, I assumed I had zero hours of VA time and would accrue zero hours going forward.

Imagine my surprise when I left the company when I received a separate check for unused VA time! Not wanting to cash it and get bitten in the ass later (if they discovered the error and wanted their money back), I asked the Payroll director why I was getting this. The forwarded it to HR who replied that it was from the latter part of 2007 (the 7 months I worked 12 hours per week) I accrued but never used and was carried into 2008 and never used. This very much appeared to conflict with the rules in the Employee Handbook but now I felt fine with cashing the check because I had covered myself.

It was weird but in a good way.

 

[Texas Proud]

I think I know what the OP is trying to get at...

First, our company does not pay for any unused vacation. We do get 3 weeks (15 days) at the beginning of the year and then get an extra day each quarter and one for our birthday for a total of 20 days...

I think what you are saying is that if I took all 15 days at the beginning of the year this is not fair to the company as it was meant to be used over the full year....

and if I left in the exact middle of the year I would only have 'earned' 7 1/2 days.... plus the extra days in my case... but if I had not taken any, then it is not fair to me since I had them but did not take them by coming to work and helping out the company.... but don't get paid for vacation...

To me, it depends on where I work... IOW, when I worked for mega I would take all the vacation for the year and not look back... working for a very small firm where you know the owners it is not as easily cut and dried... I would want to be 'fair' in my dealings with them.... sure, not what everybody would do, but it is my thinking....

 

[Finance Dave]

I got paid for my unused vacation when I retired. Is this an option?

I'm not retiring though...I'm leaving. Sure, I could ask...but I can't ask until I tell them I'm leaving...so there is a chance they'll say no. Certainly there is no contractual obligation or legal reason they'd have to pay for it.

One option might be a negotiation on how much notice I give. In other words...let's assume I have 3 weeks remaining vacation when I give notice. I could say "I"ll work 2 more months, but sometime within those two months I'll be taking my final 3 weeks vacation." I think that's a reasonable offer that would help us both out. If they wanted to be nasty and say no to that, then I could certainly just give my two weeks notice...or if I wanted to be a reall butt-head I could walk out the door on that day.

 

[Finance Dave]

If your company has an employee handbook it may address unused vacation time when an employee leaves. If it says they pay unused time, that is a binding contract. If there is no handbook or other expressed policy, and you think it very likely they won't pay you, why not start whittling down that vacation time, now?
Take a week here, several long weekends there, plus a 2-week vacation, etc. Then give your notice after you have no more accrued time. There is nothing unethical in this approach, since you're only taking what you have already accrued. I find it interesting, though, that you're concerned about ethics when you feel your company would be UNethical and not pay you accrued vacation time (employee handbook or no).
Incidentally, I know my company will not pay accrued time, and I will employ the above strategy. A fringe benefit of this is that you will have a nice transition to full retirement because of the days off you will be taking in your last period of employment.

I'll see if I can find the handbook, good idea.

I can't whittle it down "yet", as we cannot carry over to a new year...so I must wait until Jan 2012 to do that...but yes that's an option. But, I guarantee you if I take 5 weeks of vacation in the first three months of the year...EVERYONE will notice and the jig will be up.

As for your ethics comment...I don't see it as unethical NOT to pay me if the handbook doesn't say it. For example, who am I to assume that on Jan 1 I'm entitled to all of it? Some could argue that if you get 6 weeks, you're essentially "earning" one week for each two months you work...even if that is not written down everywhere. There are always different ways of looking at things.

 

[Finance Dave]

Another possible approach is to indicate that you are resigning effective June 30, but your last day of work will be May 23 and you will be on vacation from May 24 to June 30.

Given the relationship you describe between you and your employer it sounds like you should be able to work out something that allows you to get the benefits that you have earned in a way that is mutually agreeable.

You seem like a sensible person given your thoughtful response....thank you very much. That's exactly why I posted here...these types of comments.

Yes, I had considered that first approach and may use it....I think that's a good compromise.

As for the relationship, you are correct and I like your tone. I respect that they've provided me a livelihood, an education (I did all my schooling at night while working, and I have a BS in Engineering and an MBA in Finance...so they "invested" about $50,000 in me just in schooling), and a variety of other benefits...and I don't want to ignore that fact. They are not perfect...but overall it's been a good experience and I'm grateful to this point.

Oh, and I probably didn't mention...my wife works for them also and will continue working probably another 2-3 years...so I don't want to mess that up for her.

Every state has different laws about unused vacation. I would do a google search for: "unused+vacation"+"your state here".

Will take a cursory look, but don't think this is so much a legal issue.

I know that where I work, you basically get the days you accrue. In other words, if you get 25 days and you leave on June 30th, you accrue 12.5 days. If you took 10 days before you left, they add to your final check pay for the additional the 2.5 days. If you used 15 days the subtract the equiv of 2.5 days from your final check.

This is basically what I mention in a recent post just a few minutes ago about "earning" the vacation through the year. This is a gray area, as certainly I've seen people take two weeks off the first of January...and I guess technically they had not "earned" it by that time.

As Mystang said, check your companies handbook if they have one...

Will do

Imagine my surprise when I left the company when I received a separate check for unused VA time!

Indeed a great surprise!

I think what you are saying is that if I took all 15 days at the beginning of the year this is not fair to the company as it was meant to be used over the full year....

Yes, that's part of it...see my comment earlier in this post. Thanks.

 

[Finance Dave]

Ah ha...just found the corporate policy...please stand by for an update...it appears to be good news but I want to read it more carefully.

 

[Finance Dave]

Ok, great news. I will quote from the policy (no handbook, but policy is even better).

"The Company provides a vacation to qualifying employees to ensure a period of leisure time away from their regular duties and responsibilities with the Company. Vacation schedules must be administered in such a way that all vacation entitlement will be completed on December 31 of each year. Vacation is earned as of January 1. "

"Pay in lieu of vacation will be made under the following circumstances to employees who have completed at least six months of service.

Payment for unused vacation will be made to employees retiring or terminating employment. Employees retiring or terminating employment on or after January 1 will receive vacation pay for the year."

This seems to make it very clear that I'm entitled to pay for any unused vacation up to the 5 weeks I have earned...great news!

Thanks for your help....one more item resolved!

 

[Midpack]

I just retired on 6/30, and did not use any vacation in 2011 (full year earned vacation would have been 5 weeks like you). I was paid for 2.5 weeks of vacation having worked exactly half a year. But how vacation is earned and how unused vacation is handled for termination, retirement, etc. is all spelled out in our policies, everyone knows how it works. I am sure a Fortune 200 MegaCorp also has an established written policy.

Our vacation was earned, so you earned 1/12th of your vacation each month of each year. However, you could schedule all 5 weeks starting Jan 1 if you wanted, so you pull one of the scenarios in your OP, though I know you wouldn't (I wouldn't either).

 

[Aiming_4_55]

+1 check employee handbook - edit u just found your employee hand book!

Some states require employers to paid out the unused PTO, some companies pay out a max. amount and the balance is written off.

One option to assist in trasition, offer a end date and the X week prior start taking 2 - 3 vacation days a week until all gone.

 

[ChiliPepr]

that is a great policy and good news indeed!

 

[Finance Dave]

I just retired on 6/30, and did not use any vacation in 2011 (full year earned vacation would have been 5 weeks like you). I was paid for 2.5 weeks of vacation having worked exactly half a year. But how vacation is earned and how unused vacation is handled for termination, retirement, etc. is all spelled out in our policies, everyone knows how it works. I am sure a Fortune 200 MegaCorp also has an established written policy.

Our vacation was earned, so you earned 1/12th of your vacation each month of each year. However, you could schedule all 5 weeks starting Jan 1 if you wanted, so you pull one of the scenarios in your OP, though I know you wouldn't (I wouldn't either).

+1 check employee handbook - edit u just found your employee hand book!

Some states require employers to paid out the unused PTO, some companies pay out a max. amount and the balance is written off.

One option to assist in trasition, offer a end date and the X week prior start taking 2 - 3 vacation days a week until all gone.

Looks like we were posting at the same time, see above.

THanks,

 

[Bestwifeever]

Both DH and I received pay for accrued vacation (mailed separately) when we left; mine was from a small company, his a megacorp. Neither of us expected it.

 

[Alan]

Ah ha...just found the corporate policy...please stand by for an update...it appears to be good news but I want to read it more carefully.

It is common practice that you earn your vacation in the year before you take it so there should be no ethical problem for you in that you have already earned your vacation up to the point that you choose to take it.

Hopefully the policy that you have found will clarify this.

 

[sheehs1]

Ok, great news. I will quote from the policy (no handbook, but policy is even better).

"The Company provides a vacation to qualifying employees to ensure a period of leisure time away from their regular duties and responsibilities with the Company. Vacation schedules must be administered in such a way that all vacation entitlement will be completed on December 31 of each year. Vacation is earned as of January 1. "

"Pay in lieu of vacation will be made under the following circumstances to employees who have completed at least six months of service.

Payment for unused vacation will be made to employees retiring or terminating employment. Employees retiring or terminating employment on or after January 1 will receive vacation pay for the year."

This seems to make it very clear that I'm entitled to pay for any unused vacation up to the 5 weeks I have earned...great news!

Thanks for your help....one more item resolved!

Only other thing I can think of to add....is to make sure the policy is "current" or that there has not been some addendum passed around with instructions to "insert into your employee handbook". I can't imagine that it is not current...since...companies have to be diligent about notifying employees of policy changes that affect them. Just best to make sure. Perhaps your company has current policy available online or in pdf format....on their systems?

 

[Finance Dave]

Only other thing I can think of to add....is to make sure the policy is "current" or that there has not been some addendum passed around with instructions to "insert into your employee handbook". I can't imagine that it is not current...since...companies have to be diligent about notifying employees of policy changes that affect them. Just best to make sure. Perhaps your company has current policy available online or in pdf format....on their systems?

No issues there, we have these on a website, and the website itself is considered the OFFICIAL document...but printed copies are not binding.

The only thing I will do is look again just before I FIRE to make sure nothing changes between now and then.

 

[sheehs1]

No issues there, we have these on a website, and the website itself is considered the OFFICIAL document...but printed copies are not binding.

The only thing I will do is look again just before I FIRE to make sure nothing changes between now and then.

Sounds like you are "good to go".....(so to speak) ...Finance Dave.!!

 

[Rich_by_the_Bay]

FWIW, and I may have missed this in the details of this long thread, I was able to defer my time-off payout and my FIRE date until Jan, and elected to allocate most of it to my 403b account which allows a full year contribution (limited to actual earnings including the payout, etc.) even though I only worked til January.

So, $16,500 went right to the 403b in a year in which I still had substantial residual income from payouts, last payroll check, and some transition issue consulting fees. Nice deduction for that year. So low was my income after the 403b contribution, deferred comp, etc, that I will actually be able to do some conversions or take some qualified income just to fill my 15% bracket.

Unfortunately, if your employer resets the time-off payout every December, that strategy won't work for you.

 

[dm]

My wife had 4 months of vacation time built up. She was able to take 3 months after the end of her contract to enable her to meet the 80 and out for her pension. And she took the other month in pay. We gave up 3 pension checks, and had to pay 14% of her pay into the pension fund. But the difference between 79.5 and 80 was $300 per month.

We didn't even know we had that option, as it cost her employer additional money also, they had to match the 14%. Her boss brought it to her attention.

 

[molly]

Well ..here is a note of caution to those getting paid for unused vacation. Make sure it doesn't throw you into a higher medicare payment group. My understanding is that it can be "re-evaluated" the next year...however....you will have to request it. There is no consideration of one time lump payments. Look at the total picture, not just extra unpaid vacation.