By Payroll Update Staff
Year-end processing poses a number of challenges to payroll administrators, accountants, business owners, and employers of all types. Checkpoint Payroll has put together this series of articles aimed at guiding you through the trials of the year-end processing season.
Many companies offer some form of accrued time off for employees to take leave for illness, vacation, bereavement, or other purposes. In addition, many states require some form of accruable paid leave to be paid by employers.
A couple of scenarios regarding paid leave accrual arise during year-end:
- Terminated employee leave payout
- Accrual calculation resets
Terminated employee leave payout. When an employee either quits or is terminated, there is no federal requirement for a payout of accrued unused time off. However, there may be state requirements for a payout of unused accrued time.
The Checkpoint Payroll chart “Terminated Employee (Final Pay) – Vacation Pay” quickly summarizes these payout requirements by state for terminated employees. Also, the Checkpoint Payroll chart “Vacation Pay State Laws” addresses state payout requirements by state for general purposes.
Mandatory accrual calculations. States that have paid leave accrual provisions often require a certain accrual balance limitation per calendar year, e.g. one-hour of leave for every 30 hours worked, capped at 40 hours per year. Automated payroll programs generally provide some type of accrual balance tracking that either resets automatically or manually on a prescribed basis.
The Checkpoint Payroll chart “Paid Sick Leave – Accrual and Paid Leave Other Than Paid Sick Leave” can help with compliance.
Other states require that paid leave balances be paid out and accruals reset based on the employment contract in place at the time of the employee’s hiring.
