Buying extra vacation time from employer - is this sketchy?
June 9, 2017 2:27 PM   Subscribe

Someone close to me purchased an extra week of vacation from their company, consisting of a small payroll deduction each week, to cover the extra week off. When this vacation time came around, they mentioned it to me and I thought what a great idea - presuming they were getting paid, due to the payroll deductions taken throughout the year. But no! They're not getting paid.

I made further inquiries, but they had no info and I don't want to rain on their parade. But this doesn't make sense to me - why not just take the time off without pay? What does the company do with the money? On the one hand, what a great idea and maybe no big deal to "pay" for a benefit? I've just moved to this area and have been seriously considering applying to this company myself. NB: I've worked in operations, accounting, HR and never encountered this.
posted by racersix6 to Work & Money (24 answers total) 4 users marked this as a favorite
 
Well, I'll go first even though I'm not in management, accounting or HR.

this doesn't make sense to me
They're getting an extra week of vacation (unpaid) in exchange for taking a small cut in their pay.

why not just take the time off without pay?
Because taking an extra week off without permission can get you fired. In this case, it costs you a small pay cut to get an extra week off.

What does the company do with the money?
It does the same thing(s) that it does with all the rest of its money.
posted by JimN2TAW at 2:39 PM on June 9, 2017 [4 favorites]


My assumption is that this person is essentially taking a week of unpaid leave, but that the easier way for payroll to deal with it is by deducting the same amount every week, instead of not paying them at all one week and then resuming later. So they require them to do it this way.
posted by andrewesque at 2:48 PM on June 9, 2017 [14 favorites]


I'm not sure I understand, but could the extra deduction be for other costs that are not covered by salary? I.e. benefits, payroll taxes, 401k?
posted by chevyvan at 2:52 PM on June 9, 2017 [2 favorites]


I'm not management, HR, or accounting either, but having spent a lot of time reading the archives of the Ask A Manager blog, I think the sketchiness depends on things like whether the person is salaried versus hourly, exempt versus non-exempt. Like, could the deductions violate overtime laws of the state in question?
posted by oh yeah! at 2:53 PM on June 9, 2017


When this vacation time came around, they mentioned it to me and I thought what a great idea - presuming they were getting paid, due to the payroll deductions taken throughout the year. But no! They're not getting paid.

Are you saying the company is taking payroll deductions throughout the year and not cutting your friend their regular paycheck for the time they're taking off? If so, yeah, I agree with your confusion. It should be one or the other. Either the paycheck deductions or no paycheck that week.
posted by mama casserole at 2:54 PM on June 9, 2017 [7 favorites]


In order for it to be worth it for a company to pay an employee, the employee must be more valuable to them than the money they give up, otherwise it would make more sense to keep the money and forgo the employee.

So when your friend takes another week of vacation, the company gets to keep the money they would have paid, but loses that extra bit of value he or she would have generated by working -- so they're extracting some of that extra value they would be losing.

No way in Hell would I work for a company that thought this way.
posted by jamjam at 2:54 PM on June 9, 2017 [4 favorites]


Count me in for "that doesn't make any sense."

My husband's company does this (its called "buying an extra week of vacation") but you totally get paid when you actually take the week. I've never heard of getting the payroll deduction but not getting paid.

Is the deduction pretax?
posted by anastasiav at 2:54 PM on June 9, 2017 [4 favorites]


I haven't heard of paying for unpaid leave, but assuming this is a thing, maybe the deductions are covering the costs of benefits during the unpaid leave?
posted by zippy at 3:27 PM on June 9, 2017


Thanks everyone. They are "buying" a week, so the equivalent of a weeks worth of pay is being deducted over the course of the year. The only further info I was able to get was, if they do not use the extra week by the end of the year, the deducted money will be returned to them. I think my shocked, "why didn't you just ask for a week off without pay, instead of paying your company!" might have slightly offended, so I'm not going to press it. Edited to add that maybe JimN2TAW is the answer - they're getting an extra week for a slight pay cut. Still...
posted by racersix6 at 3:39 PM on June 9, 2017


Because taking an extra week off without permission can get you fired.

I've never encountered this buying-time-off scheme before, but as someone who makes decent money but has some travel I'd like to be doing and only gets three weeks off per year (including personal days) and has to burn a fair number of those personal days for things like doctors' appointments? It's a little odd but it's a deal I'd totally take, to take a slight pay cut in exchange for more time off with the incredibly-important Not Getting Management Pissed Off At Me. It seems weird but I'm not sure I'd call it "sketchy", any more than it'd be sketchy if I'd accepted an offer of a few thousand dollars less per year in exchange for an extra week or two.

I have been a payroll accountant and have not run into this but do not off the top of my head remember anything I ever read that would say you can't do this as long as both parties are agreeing to it in advance. IANAL, I'm not your payroll person, so take that with a grain of salt, but I feel like mostly the reason this doesn't happen is that places only offer you X weeks of vacation because they're genuinely unwilling to lose you for any longer than that for anything short of emergencies. This isn't an area that a lot of employers are inclined to be flexible, even for white-collar employees. As an hourly tax accountant, I had an employer that got seriously cranky with me for taking unpaid time when I had freaking pneumonia, you know? But being charitable, part of the value of an employee is their routine presence, and you can't 100% make up for that by just not getting paid for the time you're off, or a lot more people would be part-timers. Among other things, your absence in a given week might require your employer to pay your coworkers time and a half for overtime to pick up the slack, that sort of thing.

It's something I could totally see a company abusing, but I don't think I'd call it abusive per se. Depends a lot on whether this person you know is actually making a fair wage even after all this is taken into account, and that the time off is going to something optional and that they aren't, like, "buying" what should be FMLA time or whatever.
posted by Sequence at 3:40 PM on June 9, 2017 [1 favorite]


I had an employer that let me take a few unpaid days and it wasn't as big a deal as this, but I have no idea how they wrangled it with HR stuff. My income for the year was just short a few days and I had the one short paycheck, but it was literally three days, if I recall correctly. It was a small company so somehow less complicated I assume.
posted by Medieval Maven at 4:02 PM on June 9, 2017


They are "buying" a week, so the equivalent of a weeks worth of pay is being deducted over the course of the year. The only further info I was able to get was, if they do not use the extra week by the end of the year, the deducted money will be returned to them. I think my shocked, "why didn't you just ask for a week off without pay, instead of paying your company!"
I guess I'm confused by your confusion. What is the difference between them paying their company a week's worth of pay over the course of year and taking a week unpaid? It makes no difference to the money they get in their pockets, except that in the first case they spread the financial hit over the course of a year.
posted by peacheater at 4:11 PM on June 9, 2017 [3 favorites]


why didn't you just ask for a week off without pay, instead of paying your company!

This... is literally what they're doing, it's just split up among a bunch of paychecks instead of all coming out at once. There is time value of money, but for some people (maybe your friend included), a consistent paycheck makes a big difference in terms of budgeting, and an entire missing paycheck would be a problem. Presumably this is not enough of a total amount to matter in terms of investment and whatnot. But there's no real monetary difference between taking a week without pay that week, and taking a week and splitting up the lost pay among multiple paychecks.
posted by brainmouse at 4:13 PM on June 9, 2017 [10 favorites]


brainmouse that's it. somehow couldn't get my head to process it when he said he was buying it. kept sounding like it was off somehow. thanks!
posted by racersix6 at 4:40 PM on June 9, 2017


I did this with an old public sector job of mine, and it let me get paid slightly less weekly so that I could take 5 weeks off every summer without any kind of logistical or financial hassle. It was amazing and I wish every employer did it.
posted by Jairus at 4:45 PM on June 9, 2017


Most public sector jobs in our area offer this. It's know as purchasing leave. You can also take leave at "half pay", which means you end up getting 8 weeks of leave throughout the year as opposed to 4 weeks. It's essentially 4 weeks of unpaid leave but means you still get a consistent (if smaller) amount of pay during those weeks of leave.
posted by liquorice at 5:28 PM on June 9, 2017 [3 favorites]


I do something like this for an employee of mine -- one with a host of weekly deduction obligations (alimony, child support, supplemental insurance, health insurance contribution, etc.) -- as a sort of negative advance, so by "paying in" ahead of time, he can take extra vacation while the employer can cover his commitments for a week or two, even if his net pay for those checks is zero.
posted by glibhamdreck at 5:30 PM on June 9, 2017


This is not uncommon in the public and nonprofit sectors here - it's sometimes known as 48/52. You are paid 48/52th of your annual salary, in equal increments each pay check, and get four weeks "unpaid" leave (on top of your regular leave allowance), during which you still receive your pay. I also know a few people who use the same mechanism to take a regular day off every second week, rather than taking it as a block of leave - they're essentially working "part time" (0.9 of a full work week) and their pay is reduced accordingly.
posted by une_heure_pleine at 9:06 PM on June 9, 2017


My old company used to do this, and I loved it.

It's essentially telling the employee they have two choices:
1) 52 weeks of work and 2 weeks vacation at $52,000/year
2) 52 weeks of work and 3 weeks of vacation at $51,000/year

From the company's payroll perspective, it's easier to deal with it this way than to go through the exception process needed to give salaried employees a day or two of unpaid leave.
posted by samthemander at 9:29 PM on June 9, 2017 [3 favorites]


It may also be that the payroll deductions are somehow rolled into making sure that his health coverage and any other employer covered benefits (but not 401K) are being paid for, in absence of his regular earnings that would cover those expenses.
posted by vignettist at 9:36 PM on June 9, 2017 [1 favorite]


Think of it as Buying PTO, not Buying Leave. You buy 5 additional days of PTO, which gets deducted out of your paycheck throughout the year, and then you get paid normally, while you are out of the office, like any other PTO. Some companies also offer the option to SELL your PTO, so your paycheck will instead be a little higher over the course of the year and you don't feel the urge to have to use up all of your PTO in a vacation-light year.

Unpaid Leave means you lose any employer contributions to your benefits, possibly some of your benefits, and is a huge PITA in terms of paperwork.

Extra PTO acts like normal PTO. You still get a normal paycheck, all of you benefits and deductions act like normal. Minimal paperwork.

As someone who works for a company that does this, it is a great benefit that mostly costs the company practically nothing to offer, and I enjoy the hell out of it.
posted by RhysPenbras at 8:03 AM on June 10, 2017


I used to get the option to 'translate' a portion of my bonus into up to two weeks extra vacation. They removed this option a few years ago and caused outrage. Apparently they are reintroducing it for this year because they are trying to keep people happy.
posted by koahiatamadl at 11:03 AM on June 10, 2017


It might be helpful to get an idea of how much money is being deducted from his paycheck. Is it enough to cover a full week of his pay + benefits or is just enough to pay from benefits for the week (mostly insurance, I would think) or somewhere in between?
posted by metahawk at 2:07 PM on June 10, 2017


sounds like what some school systems do.......
posted by patnok at 6:13 PM on June 10, 2017


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