Pay for vacation earned

Pay for vacation earned

Oct 01, 2006

Q: If an employee quits, do I have to pay that person for his or her remaining vacation days?

"In many states, if you tell someone that he or she is going to receive a certain benefit as part of the employment package, you can't rescind it upon termination," says Sheila Grosdidier, RVT, a consultant with VMC Inc. in Evergreen, Colo. "But the answer can vary by state, so check with your state. Also check with the U.S. Department of Labor's Wage and Hour Division (, which helps to define what you can and can't do with hourly employees."

Basically, says Grosdidier, if you promise an employee that he or she receives three weeks of vacation for being with you for five years and they quit the day after their five-year anniversary date, you owe them for three weeks of vacation. Grosdidier offers a couple ways to prevent this situation.

Sheila Grosdidier
"Some states allow you to put a statement in your employee manual that says your vacation time is incremental over the course of a year," she says. "So you'd owe them only for what they didn't take during that specified period. Or you could offer paid time off. With this approach, employees accrue vacation hours based on the number of hours they work."