Vacation days on loan from employer
December 28, 2013 8:48 AM   Subscribe

The company I work for is changing their policy on vacation days. Has anyone ever heard of vacation days being "loaned" to employees to be paid back if/when that employee left the company before the end of the year?

The company I work for used to have what I thought was a pretty standard policy on vacation days: all full time employees get 2 weeks paid vacation after being with the company for a certain amount of time. Unused vacation days could be rolled over to the following year, or paid out.

They have changed the policy for 2014. Everyone will start the year off with 1 given vacation day and accumulate 1 vacation day per month for the rest of the year. We can take vacation at basically any time as before, but any days past what we have "earned" will basically be on loan to us, on the chance that we don't stay with the company for the whole year. In that case, if we took any loaned days, we would have to pay for them. If we stay at the company and didn't use all of our vacation days, they would be paid out to us at the end of the year.

I've personally never heard of such a set up and wanted to know if anyone has a similar arrangement at work, and how you made it work for you. For example, I already have a vacation scheduled this winter and am tempted not to take the paid time off now, and just wait until the end of the year but I'm worried about how that would look to my employer.
posted by Shadow Boxer to Work & Money (28 answers total) 1 user marked this as a favorite
I've heard of that set-up, but only when the employee is new (less than one year). To have such a setup for long-term employees seems bizarre. It certainly won't help morale.
posted by flibbertigibbet at 8:55 AM on December 28, 2013 [2 favorites]

My previous employer had that setup (they brought it in at the same time that the bastards changed from monthly to bi-weekly paycheques).

There is some accounting reason why this saves money for companies. I can't tell you what that reason is, but that seems to be the onus behind it.

It's not really _that_ bad of a set up (though it does suck that they are taking away your rollover option, especially since you only get 10 days/year), and if you plan on staying with your employer through the end of the calendar year it's not all that different than what you have now (except for the rollover).

If you're planning on leaving though, yeah, you probably want to watch how much vacation you're taking in the first half of the year, or plan to be out of pocket on your last paycheque.
posted by sparklemotion at 8:58 AM on December 28, 2013

Every employment contract I've had has worked this way with regard to what happens if you leave. They just adjust your last pay packet to account for the holiday days they owe you (or you owe them). Seems quite normal to me.

At one place I worked where they paid for unused holiday even if you didn't leave, I'm pretty sure it was a deliberate incentive for their younger employees without families to take less holiday than they were entitled to.
posted by emilyw at 8:59 AM on December 28, 2013 [2 favorites]

As a clarification:

Generally, the 'accrue time in first year' model is either 1 day/month or a 'lump' of half of the yearly vacation at the 6 month period. Some employers will allow additional days to be taken, but with the promise of being paid back if the employee leaves (the first year is, after all, a trial run for both parties). Other employers, depending on jurisdiction and employment laws, will either consider all vacation taken in the first year to be 'in the negatives' (they consider vacation a right earned after 1 year).

This accrual model generally says, "ok, you've done your year, you now have X days for every full calendar year hereafter" and any additional years spent at the company could be used to accrue additional vacation days.

I have also heard of people being allowed to go negative (e.g. using 2 weeks + 1 day) of vacation time, and having to pay that back (the extra day) if they leave before the end of the year.

But having to pay back standard vacation? No.

N.B.: I live in Canada, which has regulations about vacation pay and vacation time, which is not true of the US.
posted by flibbertigibbet at 9:01 AM on December 28, 2013

I've worked at a couple places that did this for all employees (not just new). Both were in the Midwestern US. It wasn't terrible in practice, though I didn't love it.
posted by Meg_Murry at 9:08 AM on December 28, 2013

My employer allows us to use more vaca. time than we have, and either earn it back, or have it deducted at departure. They're giving you 2 more days - yay - and not allowing rollover. For some companies, vacation time owed is a significant 'debt.' Especially if the company does a lot of contract work, it makes a lot of sense not to allow vaca. to accumulate.
posted by theora55 at 9:09 AM on December 28, 2013 [1 favorite]

In many states, organizations are required to pay an employee for all granted vacation time if they leave. As such, an employee in those states has the opportunity to disproportionately "cash out" by leaving immediately after the yearly rollover date, thereby getting a payout of weeks of vacation time for a year that they've only worked a few days of. Employers generally set vesting dates where time off is earned gradually throughout the year to prevent an employee from unfairly timing their departure to take advantage of this.

In the scenario you described, it sounds like you've gone from getting 10 vacation days a year to getting 12, with the downside being that the employer has closed the loophole I described above. For anyone expecting to stay with the firm this change has only a positive impact, and for others, they are only at risk for having to pay back the days they did not work. It sounds like a fair trade to me, and I'm surprised that individuals above would think that it's contemptuous on the part of the employer.

The Wikipedia article on paid time off indicates that approximately 40% of organizations use this sort of banked paid time off system these days. It's been in place for all of the firm's I've worked for. It hasn't been a problem for me, and I've only seen it be applied fairly.
posted by eschatfische at 9:20 AM on December 28, 2013 [1 favorite]

If I understand it correctly the only factual change for you is if you decide to leave. So if you are looking to change jobs then yes, do the maths and be prepared for a smaller pay check, if you have taken more vacation time than due to you by that point in the year.

For what it's worth, I've only ever had employment contracts where I could take all my annual leave in February, in theory, but would have had to pay back the unearned portion if I decided to leave during the year. This was in Germany, the UK and Switzerland so not countries known for their total disregard of employee rights.
posted by koahiatamadl at 9:21 AM on December 28, 2013

2 weeks seems kind of light. But the no rollover plus accrual stinks for spring vacations.

Where I work its accrual of nn hours every month but has rollover up to x weeks.

Paid out of leftover is a lot better than use it or lose it like some places.
posted by TheAdamist at 9:22 AM on December 28, 2013

Where I work we accumulate 2 days/mo during the year, and aren't officially allowed to take off vacation time we haven't "earned" yet (although some of that varies on your manager and how close you are to having accumulated the requested days).

But we also get to rollover a maximum of 48 days per year. So after your first year it's rarely a problem.

IMHO, the 1 day/mo wouldn't bother me as much as not having days that rollover.
posted by sbutler at 9:22 AM on December 28, 2013

The accrual is pretty common. The no rollover is too, but it's unpleasant -- a lot of times they go more to a limited rollover (you can't accumulate more than two years of vacation). Sick days are generally not rolled over at all.
posted by jeather at 9:41 AM on December 28, 2013

Every job I've had would dock your last paycheck if you took all of a year's vacation but did not finish the year. Totally normal.
posted by Juliet Banana at 9:46 AM on December 28, 2013 [2 favorites]

The last company I worked at did this for everybody. I typically never got ahead of my accrued time, but it was nice to know that if I needed to take a week or two off early in the year then I could.
posted by azpenguin at 9:48 AM on December 28, 2013

The "no rollover" is becoming increasingly common, at least among public companies in the U.S. I believe it is largely for accounting reasons - the company would have to show a liability for any rolled over vacation when they close the books. By not allowing any carryover at all, they can avoid having to consider vacation time at all when preparing their annual statement. The borrowing provision allows workers to retain flexibility in timing their vacations. Speaking for myself, I'd rather be able to borrow the vacation than have to bank it ahead if I want to travel in the spring.
posted by mr vino at 9:48 AM on December 28, 2013 [1 favorite]

Response by poster: Thank you for all the responses. I'm glad to hear that it is pretty common and very much appreciate hearing about other people's experiences with this. I had thought the accrual thing was more just for new employees.

I think my biggest issue with it is that the policy was changed for 2014 with little notice, and I already have a vacation planned in January that was approved by my boss before this change in vacation structure apparently was put into place (I say "apparently" because I was just told by a senior co-worker, with no mention from my boss who approved the vacation time and who would typically be telling us of such changes). My big issue with it is that if I take the time off as I'm planning (plane ticket, hotel already paid for), I will owe a total of 4 days and I hate that feeling. But if I opt to not get paid for the time off now (and take it at the end of the year), I'm worried it will look like I don't plan to stick around until then. Or what if I get laid off? If I had known the vacation policy was going to change in 2014, I would not have planned a vacation so early in the year.
posted by Shadow Boxer at 9:52 AM on December 28, 2013

This sounds very typical of every place I have ever worked (Fortune 100 companies). I also accrue by month but can take my days even if I haven't yet earned them.

I would be less concerned about this structure in general and more concerned about the number of days total per year and the lack of rollover. Two weeks is skimpy to me (unless you have a separate pot for sick/personal time). I get 23 days per year (vacation/sick/personal), plus two floaters and can roll a week and purchase six additional days if I want. I didn't purchase but did max my roll so next year I have 30 days, or six business weeks. To me, the roll has been key in my life during the "big" moments - when I was getting married and took a few days before the wedding to wrap up and then 8 vacation days after for honeymoon. Or the time we took two weeks for a big trip to Europe. Or when I had my baby and was on maternity leave. That's when I really appreciated the roll.

With only getting two weeks, you stand a good chance of having to pay when you leave the company. I changed employers in Sept and was paid for 4 days I had earned but had not taken. If I had only had two weeks total available, I would have been paying it back. On the flip side, it was nice to get a bonus of four days pay when I left and I used that to fund the week off I took between jobs.

Since you can take the time when you want it, it won't impact you that much, other than the lack of roll, if you stay.
posted by polkadot at 9:53 AM on December 28, 2013

Also, a friend I know works for a company that provides generous time off but does not allow rolling. It took her a bit to adjust but she said she actually liked it because it forced her to take her time off. For some people, knowing you can roll makes you hoard your days for the "what if"
posted by polkadot at 9:59 AM on December 28, 2013

I've actually never worked anywhere that didn't work on an accrued leave basis. The prohibition against rolling it over is relatively uncommon and is on the crappy side, but the ability to spend it in advance freely in also relatively uncommon and is on the good side. At my current company, you can spend leave in excess of what you accrue by only 16 hours and it requires a bunch of approvals to do so.
posted by Lame_username at 10:41 AM on December 28, 2013

Or what if I get laid off?

This is an excellent question for your HR department. It seems unreasonable that if you were laid off, you'd have to pay back vacation hours. That's a different scenario from you quitting voluntarily.

And if you have only heard about this new policy from a co-worker, it'd probably be good to check in with your boss. "Boss, I just heard something about this new vacation policy. I'm a little concerned that I'm going to be in debt for four days. Since I've already paid a lot for my vacation in January, I want to make sure everything is copacetic."

On preview, it sounds like you are saying you have hours accumulated that would normally have rolled over. You are planning on using these hours in January but now, on December 28, they have become use it or lose it? I'm not sure about the laws where you are but I wouldn't think that is legal. I would get some clarification from HR.

Or are you saying historically, you'd get two weeks starting January 1 and this year, you were planning to use them in January?
posted by Beti at 10:53 AM on December 28, 2013

Response by poster: I was planning using time from the 2 weeks that I'd get historically starting January 1st. for my vacation in January (I actually took all my vacation time in 2013 so was not planning on using roll over days.)

We do not have an HR department where I work. It is definitely a conversation that I will have with my boss this week, but wanted to get a sense of how typical this setup was before doing so. I also just wish that it was brought up to me when I submitted the request for time off.
posted by Shadow Boxer at 11:33 AM on December 28, 2013

What do you mean by "owe a total of four days?" Do you mean you are taking those days without pay? Or do you mean that if you quit in the next few months they will take it off your last pay but if you stay on nothing will happen? Because that second one is very common. And the first one is not unheard of.
posted by ThatCanadianGirl at 12:01 PM on December 28, 2013

Response by poster: It is my understanding that I would be getting paid for those 4 days but basically as a loan until I actually have earned them through time (1 per 4 months), so if I quit before then it is my understanding that they will take it out of my last pay. I guess there is always the option to not get paid for those days and just wait until the end of the year to get paid out, but I worry that will look like I plan to quit before then. Looks like I definitely need clarification from my boss but thank you all for letting me know that the situation is not uncommon.
posted by Shadow Boxer at 12:14 PM on December 28, 2013

This is how it's done for everyone in New Zealand (with roll over at year end). And how it worked in Ireland (with no/limited roll over). Germany has a similar accrual system although I don't know all the details yet. It's so normal world wide I find your question confusing. Of course you accrue your holiday days as you go.

The only odd thing is getting only two weeks per year, that's half (or less) the legal minimum in the countries I've worked in.

So taking extra days you didn't earn yet and paying them back in over time is also totally normal and I don't really get the objection. So yeah, it could look odd if you refuse to do it that way without some reason.
posted by shelleycat at 12:58 PM on December 28, 2013 [2 favorites]

It sounds like you have an error in your mental accounting. Under the old system you accrued vacation time before you used it. So your vacation in 2013 was earned in 2012. You then earned two more weeks in 2013 that you plan to use in 2014. So you already have those two weeks saved up. Under the new rules you will be accruing more vacation at the rate of one day per month in 2014. So you start 2014 with two weeks and will be earning two more weeks during 2014. This means you have to use up four weeks of vacation in 2014 or else get the balance paid out.

So it seems you aren't going to be in the hole with your 2014 vacation. You will be just using up what you earned in 2013. Then you will have to take an additional two weeks before the end of 2014.

However, in 2015 you will start out with zero vacation days. If that bothers you, then here is how you handle that. Say you only take two weeks vacation in 2014 using your already earned day. At the end 2014 you will get paid out for the extra two weeks you earned in 2014 but didn't use, as an extra paycheck. Put that extra paycheck in a separate bank account. This is equal to the vacation days you will earn in 2015. If you don't work the entire year, you have the bank account to pay it back. Essentially you are just doing the same thing the company is doing now, accruing vacation time and holding it as a future debt.

Check to see that you are starting out with two weeks in January of 2014 already earned.
posted by JackFlash at 1:08 PM on December 28, 2013

I was planning using time from the 2 weeks that I'd get historically starting January 1st. for my vacation in January (I actually took all my vacation time in 2013 so was not planning on using roll over days.)

What would have happened under the old system if you took this vacation and then quit in February 2014?

In most places, your last check would show that you had to pay back some of those days because you hadn't earned them yet. It feels like you are issued 2 weeks on Jan 1, but if you read the handbook, you probably really earn them 1 at a time each month and if you quit in the middle of the year you have to pay some back if you've used the full years' worth of vacation days. I don't see this as any different from your new system, except now you are more aware of it. If you're not planning to quit, it's not a big deal at all.

Being laid off is a good question to ask, but otherwise this is totally normal for many many companies.
posted by CathyG at 4:13 PM on December 28, 2013

My company also uses an accrual system where employees can take days off before they are accrued. We are permitted to roll over 5 days from year to year, but if we end up with greater than 5 days at the end of the year, we lose the excess days and don't get paid for them, which is shitty and results in 3rd quarter staffing issues.

Anyway, the system being instituted at you place of employment seems fair to me, although I will say that 13 vacation days a year seems quite low unless you get every state holiday off as well. I really wouldn't worry about being in vacation day debt unless you're planning to quit before May 1.
posted by Maisie at 5:33 PM on December 28, 2013

OP, you are waaaaaay overthinking this, and it's certainly not a hill you wanna die on. Unless you plan on quitting your job in the next couple months, the "owed" 4 days is meaningless accounting. You'll earn them back over the course of the year. It's totally normal, and not that unreasonable.
posted by mkultra at 5:37 PM on December 28, 2013 [2 favorites]

Adding to the chorus here - every place I've worked has used the accrual system. If you quit during the year and haven't used all the vacation days you've accrued until then, you get paid for those days on your last paycheck, or if you've used more days than you've accrued until that time, they'd be deducted from your last paycheck. Totally normal. As others said, unless you're planning to quit your job in the next couple months, don't worry about it.
posted by SisterHavana at 8:54 PM on December 28, 2013

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