Going into leave debt: if you let employees borrow vacation time, provide a clear, consistent policy that fits your business needs

HR Magazine, Sept, 2005 by Roseanne White Geisel

In many states, employers can ask employees to sign a payback agreement that includes a statement that the employee is responsible for attorneys' fees if the employer is forced to take legal action over non-reimbursed unearned time.

At Washington, D.C.-based Fannie Mae, the policy and procedures manual states that when an employee is resigning, the employer may withhold a salary equivalent amount of used but unaccrued days off, says spokeswoman Gabrielle Barry. Conversely, employees are paid for days accrued but not used.

Administration of the time-off policy is eased by Fannie Mae's human resources technology. Employees report their attendance to their manager online, and the manager signs off and transmits it to payroll.

At Calibre, an automated standard field on pay stubs indicates the employee's PTO balance expressed in hours. As part of the process when an employee leaves the company, the accounting system will indicate if the employee has a negative PTO balance, Caylor says. As the policy and procedure manual indicates, the value of the time owed will be deducted from the last one or two paychecks. Similarly, the company pays the employee the value of any unused accrued time.

"It's very easy to administer, because it's one bank of time," Caylor says.

Layaways And Donations

Companies may want to consider alternatives to allowing employees to borrow against unaccrued vacation time. For instance, instead of allowing an employee to go into "debt," allow them to put the time on "layaway."

In addition to borrowing leave, Fannie Mae employees also are allowed to take one week of unpaid leave for vacation. Such "purchased" leave can be used only after paid leave is consumed, and employees' money is refunded for unused purchased days, Barry says.

The option was implemented because many employees go to Fannie Mae from companies that offer more vacation time, she says. An employee survey indicated that half the workforce wanted more vacation.

"A lot of employees love the idea of buying a week," Barry says.

Susan MacHolda, SPHR, senior director of work/life and diversity at Carlson Companies in Minnetonka, Minn., says that for the past 15 years the company has allowed employees to purchase an additional two weeks of vacation and pay for it over 26 pay periods. Employees must elect the purchase during the benefits enrollment period or within 30 days of being hired.

Another successful Carlson program is a hardship policy that enables employees to donate time to a colleague who may have a situation that requires additional leave.

Borrowing unaccrued time should be examined in the context of all compensation, paid and unpaid time off, and flexibility offered, says Wolff of Watson Wyatt. "Don't over-enrich or under-enrich," she says.

ROSEANNE WHITE GEISEL, A FREELANCE BUSINESS WRITER AND EDITOR IN ARLINGTON, VA., IS THE FORMER MANAGING EDITOR OF BUSINESS INSURANCE MAGAZINE.

Online Resources

For more information on state laws governing wage deductions, see the online version of this article at www.shrm.org/hrmagazine/055eptember.>

COPYRIGHT 2005 Society for Human Resource Management

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