The legal predisposition that allows employees to cash out vacation time notwithstanding, allowing employees to do so has its benefits.
Allowing employees to cash out vacation time maintains internal equity. Approval or rejection of vacation time depends on the company’s discretion, and the employer invariably considers factors such as seasonal workload, indispensability of the person, and other factors before approving or denying the leave request. Selective approvals and denials invariably attract charges of discrimination, and even if the company may justify its stance in court, the employee not offered the vacation leave may feel demoralized. Reimbursing employees not allowed to avail vacation leaves mitigates the charges of inequity greatly.
Generally, employees tend to prefer cash in lieu of taking the leave if such a facility exists, and as such, the employer would have to process fewer leave requests. This provides flexibility and more options in allocating the workforce.
Employees entitled to vacation time are ones that work for a minimum of one year. Allowing them to cash out their leaves means the company gets to utilize the hours of their most productive employees.
When the employee quits the organization and becomes entitled to cash out the accumulated vacation leave, it makes no difference for the employer whether the employee opts to avail the vacation immediately before leaving, or cash it. From the employee perspective, it is advantageous to avail these leaves, for the employee gets an additional few weeks of service to add to work experience and full insurance coverage during the leave period.