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Federal Policy About Donating Vacation Time

written by: •edited by: Jean Scheid•updated: 6/1/2011

As an employer, HR manager, or business owner, you can implement a policy for donating vacation time that will create new solutions for your employees—without costing you any additional money. Here’s an article about how to do it and why you’ll benefit.

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    Why Create a Vacation Donation Policy?

    A vacation donation policy means that employees in your company who have unused vacation hours can donate time to employees who have exhausted their benefits. Why should you implement such a policy--it just means more paperwork and bookkeeping for you FreeDigitalPhotos, hand in the sky, Luigi Diamanti and your company, right?

    But you’d be smart to consider it. As the company owner or human resources manager whose job includes preserving your employees—one of your most expensive and unpredictable assets—you derive several benefits. Before we talk about any existing federal policy about donating vacation time, think about the following.

    • Consider the predictable string of events when an employee is stricken by catastrophic illness or injury and has not earned enough paid leave to cover his absence: Your employee struggles to keep his head above water financially while he’s recovering. He and his family seek solutions such as applying for disability, Medicaid, or job retraining. Possibly someone else in the family assumes the role of breadwinner. You’ve already invested a lot of time and money recruiting, training, and retaining this employee, and you’re about to lose him. Everyone in the company who knows the circumstances feels bad about it.
    • Consider, also, what happens when you get a resignation from an employee who has not used up his vacation time: You compensate him for that time in his final paycheck, provided he has issued adequate notice to quit and is leaving in good standing. What do you get for paying that benefit? Nothing.
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    What Does Uncle Sam Say?

    FreeDigitalPhotos, I Miss You, Michelle Meiklejohn Now, what does the federal government say about donating vacation time? The fact is you don’t have to pay any kind of vacation time at all, ever, to any of your employees. The Fair Labor Standards Act (FLSA) carries no requirement for you to establish any kind of vacation policy.1 Therefore, there is no federal policy about donating vacation time.

    But you know you will pay vacation time just to stay competitive. Just as you recognize the wisdom of a fair vacation leave policy, so does the government. The United States Office of Personnel Management has set forth a policy about leave share programs that identifies the following provisions. Following each point are my parenthetical comments describing trends in Corporate America.

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    • Donated leave can include vacation or sick time accrued by the donating employee. (Some private companies limit this to freeDigitalPhotos, heart, renjith krishnan vacation time only.)
    • The recipient employee must use the donated time to manage his own illness or that of his parents, spouse, children, siblings, siblings’ spouses, or individuals for whom he has legal responsibility. (Private companies limit this to immediate family members.)
    • Medical leave is defined as a serious condition that will cause the employee to be absent from work and will result in a significant loss of income from the home. (Private companies often spell out that donated vacation cannot be used for brief, ordinary illnesses. Also, a few companies extend the definition of catastrophe to include natural disasters.)
    • The recipient employee must have exhausted all available paid-time-off options.
    • The condition must be certified by a physician or the manager at an appropriate agency. The recipient employee does not have to pay for the cost of this certification.
    • The minimum absence must be 24 hours or 30% of a pay period. (Private companies usually specify that absences must exclude common illnesses that will resolve within a few days such as cold or flu.)
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    More tips on Donating Vacation Time

    • If a recipient’s request is denied, he is notified in writing of the reason.FreeDigitalPhotos, hand and heart, Francesco Marino 
    • The donor employee submits a written request to donate his available vacation accrual. He can choose to specify the recipient. He cannot donate his time to his supervisor. He can only donate one-half of his total annual vacation accrual. (Some companies specify that the donor can donate as many hours as he wishes but must maintain 40 hours in his vacation bank.)
    • The recipient employee cannot receive more than 40 hours of donated time per request; additional requests must be evaluated. Leave for part-time employees is prorated to reflect their weekly work schedule. The employee accrues benefits of his own while he is on donated leave. (Some companies spell out that a specific number of weeks of time can be donated. Recipients can receive donations from multiple donors.)
    • If the recipient’s crisis resolves, the donated time returns to the donor; the employee cannot “cash in" the donated time.
    • If a donor employee dies, his estate cannot receive the value of unused donated time.
    • The donor employee can donate a minimum of four hours of leave per year. (Some companies require at least one day per year. Additional time can be specified in numbers of hours or increments of a workday.)
    • The pay grades of both the donor and recipient employees are recorded. (Some companies convert the hours of leave received by a donor according to his pay grade. For instance, someone who earns $15 per hour donates 4 hours [value: $60]. The recipient earns $12 per hour; thus, he receives 5 hours of leave [$60 divided by 12]. The tax implication is that the recipient employee will have to pay the income tax on the donated time.)
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    FreeDigitalPhotos, golden world, jscreationzs A twist on this practice has been IRS-approved when Americans are rallying to help those affected by natural disasters, such as Hurricane Katrina or the Haiti victims. Employees donate time back to the company, which converts it into a cash donation—and then takes a charitable deduction on its annual taxes.

    Should you follow the example of this federal policy about donating vacation time? You proactively maximize the value that your company gets by retaining valued employees, and you minimize recruitment costs. You preserve your employee pool, because employees experience improved morale, increased loyalty and communication, and better productivity.

    To paraphrase, an unidentified corporate human resources manager, a company is an ordinary thing, but the people who make it up are extraordinary. Maybe you can help your employees to do something extraordinary.

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    Resources

    U.S. Department of Labor Fair. Wages and hours worked (FLSA), retrieved at http://www.dol.gov/compliance/topics/wages-other-holidays.htm: 1Exception: Those affected by Bacon-Davis and Related Acts (DBRA), which cover federal or D.C. government construction and repair contracts.

    U.S Office of Personnel Management. Administrative staff policy on voluntary leave transfer program, retrieved at http://www.opm.gov/oca/leave/HTML/vltpregs.htm

    Image Credits: Free Digital Photos: Luigi Diamanti, Michelle Meiklejohn, Renjith Krishnan, and JSCreationzs