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Donating vacation to another employee  
Posted: 06/02/2009 07:55am   418 Views
  
I am searching for any company that has a policy where employees may dontate their unused vacation to another employee who has a need.  For instance, taking care of a sick child and has exhausted there own paid leave options, however, another employee will donate the unused vacation so the first employee may continue the leave with paid rather than unpaid time.  If you are aware of this option, do you know of any consequences to the employees, company, etc. such as additional reporting, audit, or tax?

Private10790

   
Donating vacation to another employee  
Posted: 06/02/2009 09:48am   Revised: 06/02/2009 10:21am  
  
right away, I'm against it.  If this precedent is established, I suspect Bad Things will follow.

Will people start selling their vacation or sick days to the highest bidders?  How could you stop them from doing that, if you permit this?

It also undercuts the whole reason for vacation: to get away, to refresh the spirit and to enhance total work-life balance by permitting more uninterrupted family time.   

Maybe I'm crazy or simply naive, but it goes against my "policy view" grain as opening the door to employees similarly trading or auctioning or selling their holiday pay or benefits packages or any other perk or bennie the enterprise funds as part of their total remuneration/reward package.  I suspect there really would be tax implications, too, since this smacks of the kind of swap or trading activity where the IRS goes cross-eyed and insists on someone paying the tax on the value of the product or services exchanged.  Vacation is tax-deductible to the employer under certain rules which I think this may violate; but that's a question best answered by a tax accountant/attorney, CPA or enrolled agent.

As an alternative, why not simply suggest that the "caring" emp simply donate their pay to the needful person in the form of cash out of their personal pockets rather than co-opting the employer into becoming enabler in their scheme? 

Private10775

   
Donating vacation to another employee  
Posted: 06/02/2009 10:15am   Revised: 06/02/2009 10:17am  
   (1 rating)
The US Postal Service has a "leave sharing" program that allows employees to donate up to half their annual leave expected to be accrued during a year to another employee that is incapacitated by a serious personal health condition.  The incapacitated employee must be expected to be absent at least 40 hours or more beyond the expiration of their paid annual and sick leave benefits. 

As you'd expect there are a lot of rules associated with the practice - 11 pages worth.  Send me an email at charles.p.weatherhead@usps.gov to get a copy of the written policy.

The rest of the federal government liked the idea so much they established their own "leave transfer" program that can be found on-line here

Private12844

   
Donating vacation to another employee  
Posted: 06/02/2009 10:35am   Revised: 06/02/2009 10:38am  
  
It's not quite the same...but a number of Texas school districts do have a "sick leave bank" which allows employees to donate some unused portion of their sick leave to a bank which can be tapped by employees who have exhausted their own sick leave.  If you google "Texas sick leave bank", a number of school district policies come up.  I know it's not exactly what you're looking for...but thought it might be a place to start.

Private10790

   
Donating vacation to another employee  
Posted: 06/03/2009 06:55pm  
  

Does anyone else find this odd?  ...that while we are discussing how employees can waive or give up their vacations, WorldAtWork staffer Andrea Ozias is writing Please Take A Hike in the Editors' Notebook blog about how important vacations are for productivity.


Private10775

   
Donating vacation to another employee  
Posted: 06/03/2009 07:36pm   Revised: 06/03/2009 07:42pm  
   (1 rating)
Jim,

When I supplied my employer's practice to the questioner, I was providing information, not value judgements. 

Value judgements can only be made when one understands the dynamics and peculiarities of each company.  I'm not very familiar with Texas public education, but they must have had some rationale for developing their sick leave sharing policy unique to the peculiarities of their organization.  

In the USPS case, we have very little control over benefit policies for our bargaining represented employees for a variety of reasons including ... statutory requirements to be in certain benefits; inherited benefits from when the Post Office Department was part of the president's cabinet; collective bargaining and binding arbitration as the only way to make changes in certain other benefits; and over 600 senators and representatives who like to control the postal business. 

But regarding our leave benefits, I'd say that our annual leave policies are a bit more generous than private sector levels, and our sick leave benefits are a bit below private sector levels.  So it doesn't bother me that employees want to donate some of their annual leave to help the rare case of incapacitating personal illness or injury where an employee runs out of sick and annual leave and is expected to be without pay for at least 40 hours  Like I said, there are 11 pages of guidelines on this policy to ensure it's not just a willy-nilly boon-doggle.  

Thanks for the thought provoking question though Jim.

Paul  

Donating vacation to another employee  
Posted: 06/03/2009 09:18pm  
   (1 rating)

In the energy industry we typically see a policy of "use or lose" in vacation which encourages time off.  However, we also have many long service employees with more than 3 weeks of vacation who - for many reasons - do not use 100% of their days. 

This request has come from employees who would like to help their co-worker in a time of need during a family crisis, and they are aware that other companies offer such a policy.  While they may not be able to give money to the co-worker, they can offer a day or two of vacation that is not taking away from their own work life balance. 

I hope this helps to better explain the situation. I have seen this type of policy in public companies.  The process is usually to go through HR so that there is not a situation where all vacation would be eliminated from the donating employee, rather to help work through the situation with all employees.  we do spend alot of time with those that we work with, and i find it heart warming that this has come from the employees.  Yes, we do need to make sure that there is a balance, however, we do not see it as limiting. 


Private10790

   
Donating vacation to another employee  
Posted: 06/04/2009 09:08am  
  
Bethany summarized the issues well and laid out a good solid sensible philosophy. 

Having started in labor relations, Paul, I wasn't making a value judgment and I do know exactly what you mean!  Think I still have a rubber stamp somewhere with the standard "no-precedent" disclaimer language for all the special (and occasionally goofy) deals we would cut for various reasons.

Private12155

   
Donating vacation to another employee  
Posted: 06/30/2009 01:59pm  
  

We have a long-time policy for allowing employees to donate PTO in certain situations.  It's popular but not abused.  Many times, employees want to support a coworker and can more easily donate PTO than cash.  It allows work teams to rally for the sake of a coworker with an unexpected need.  It also removes the "cash donation" aspect which would make some receipients uncomfortable with it.  In the past, we only allow it if the recipient's own PTO bank is completely exhausted and only in situations like medical or maternity leave, family leave, death in family or other family emergency.  These restrictions prevented deal-making and abuse.  However, we discovered recently that the IRS has only approved PTO donations without tax repercussions if 1) there is a medical emergency where the employee or family member requires a prolonged absence from work, resulting in a substantial loss of income because the employee has exhausted all paid leave available, 2) an employee experiences a death in the family, or 3) when an employee suffers a loss or injury due to a national disaster.  Recent revenue rulings made it clear that these situations don't result in taxation of the donating employee, but it's unclear for other situations, so we changed our policy to restriction donations to these situations.


Private10790

   
Donating vacation to another employee  
Posted: 06/30/2009 02:19pm  
  

Thanks for the tax-treatment guidance information, Mary.  We all know here that no one is supplying "tax advice," but we also recognize that anything supplied by an employer that is considered valuable by employees will eventually get taxed. 

Maybe we should all take a lesson from the politicians and supply employees with assistance in setting up tax-exempt charities or foundations or trust funds or societies in which they can place tax-deductible dollars that will remain tax-free as they employ friends and family as employees, consultants or contractors.


Private13785

   
Donating vacation to another employee  
Posted: 07/07/2009 12:50pm  
  

We considered this at my company.  While it is emotionally appealing and seems simple enough on its face, we found that the effect is a higher cost to the company.  The reasonsing is that the employee is not really giving up anything except an opportunity for paid time off.  The result is that they continue to work the time that they would have taken as vacation and are paid.  Meanwhile, the company is also paying someone else an additional day, week, etc. of time.  I don't see the cost as neutral, nor that the employee has really extended themselves in making a meaningful donation from their own resources.

What am I missing?


Donating vacation to another employee  
Posted: 07/07/2009 01:30pm  
  

Hello,

The "up side' for those employees who would like to donate some time are 1) they are able to donate time and not worry about money from the family or cash outlay, and 2) the company benefits in having them at work rather than away from work (we have a use or lose policy on vacation).  For the recieving person, who needs to be off from work and has no pay to do so, benefits by pay in order to avoid that stress while trying to care for the sick family member.  Several things happen with this process.  The donating employee is allowed to contribute to the co-worker without cash outlay from their own family while helping.  The recieving person is less stressed in returning to work surrounding outstanding bills, etc. and appreciates the benefit from both the co-worker and the company who allowed this promoting positive impressions.  The company is going to pay the vacation unless it is not used which is not likely.  Therefore, the positive attributes of this policy - while not used very frequently - seems to actually benefit all parties.  Feel free to contact me if you would like to discuss further.  we have only had one person use this policy in 3 years.


Private10775

   
Donating vacation to another employee  
Posted: 07/07/2009 01:42pm   Revised: 07/09/2009 07:35am  
  

WorldatWork member Ann Bares wrote about these types of plans several years ago on her highly respected blog "Compensation Force."  She does a nice job explaining the rationale for these programs here.

PS: Not that its a critical issue, or should be, but Ann's blog also observes that there may be some company cost savings with these programs since donors of vacation hours are generally higher paid than recipients of vacation hours. 

 


#1

Donating vacation to another employee  
Posted: 07/09/2009 12:04pm  
  

I see the cost as neutral. One employee is on vacation and the other is at work because they have less vacation to take. You're just allowing someone else to take your vacation.  Am I missing something?


Private10775

   
Donating vacation to another employee  
Posted: 07/09/2009 12:28pm   Revised: 07/09/2009 12:29pm  
  

Perhaps neutral cost if all employees (both leave donors and leave recipients) are paid the same rate of pay; and if there is no "use-it-or-lose it provision" and all unused earned leave is allowed to carryover from year to year. 


Private10790

   
Donating vacation to another employee  
Posted: 07/09/2009 01:02pm  
  

The pay rate of the person actually taking the vacation "donated to them" may be lower than the rate of the donor, as Paul mentioned immediately above.  That might "save" the employer some money from the costs estimated from the donor's vacation cost in their actual vacation expense realized.  But it excludes any "savings" the employer would realize if the employee did not have any option to use paid vacation or sick time and simply went without wages for the period missed; if they had received no donated vacation time and simply had to go without, there might not have been any vacation pay cost to the employer.

And there's another complication.  Most employers wisely supply pay in lieu of vacation accrued but not taken to departing workers, not because they are inherently benevolent but because they have sharp tax accountants who deduct the booked estimated costs of accrued vacations as payroll expenses in corporate income tax returns:  thus, if they did not actually pay out the monies allocated for the "accrued vacation", they technically would have to file an adjusted tax return withdrawing their excess deduction.  Not that anyone would get upset or bothered over one case, but if you don't have a policy in place to assure this remains a non-issue, a major corporation could accumulate some substantial sums as "illegitimate" deductions.  Carelessness in such details tend to get tax accountants fired, thus the policy practice.

If the employer has deducted an executive's vacation pay in their tax return when in fact a junior clerk's pay was actually paid out for that personally-unearned loaned-vacation period, that could magnify the issue in the eye of a nasty IRS examination agent auditing payroll tax deductions for vacation pay.  Don't expect that anyone who has adopted this "vacation donation" policy has ever encountered this problem, or there would be no such policy or there would be a specific work-around.  But I suspect the issue sits out there festering ready to burst on someone.  Or am I all wet as usual?


Private10775

   
Donating vacation to another employee  
Posted: 07/09/2009 05:23pm  
  

Not wet at all, Jim, just keenly aware of important issues that others don't always think about.

As to the cost issue, my employer's experience, and evidently the experience of some others, is that cost is really not a major factor.  If cost was a major factor, we'd probably fight to kill the program or eliminate the source of unreasonable costs, since we have over 80% of our costs based on personnel. 

No, I think that the main impetus for having these programs is the better nature of our employees who want to have a way to help a co-worker in dire need.  The way our program is set up, if there was a person trying to milk the system for other people's leaves, he/she might not find co-workers donating their leave again --- somewhat analogous to the lesson of the boy who cried "wolf" one too many times. 


Private10775

   
Donating vacation to another employee  
Posted: 07/27/2009 06:35am  
  

In case anyone is still interested, our leave sharing policy is now on the WorldatWork "Tools & Sample Documents" web site.

Hope it helps.   


Private22434

   
Donating vacation to another employee  
Posted: 02/15/2010 12:27pm  
  

Are any of the previous posters working for Canadian organizations?  If not, is anybody aware of any Canadian organizations who may have adopted such a practice?

Also, administratively speaking, how easy is this program to implement and run (i.e. were there major changes to your payroll systems?).


Private34235

   
Donating vacation to another employee  
Posted: 02/15/2010 01:52pm   Revised: 02/15/2010 03:26pm  
  

You might try looking here at the various lists of top Canadian employers. http://www.eluta.ca/top-employer-hp-canada

 Another source says this: Finally, some organizations allow employees to donate unused vacation time to peers; while specific prevalence information on this plan design feature is unavailable, research suggest that it is relatively rare. http://hosteddocs.toolbox.com/pto-and-vacation-plans.pdf

You also might try the latest SHRM benefits survey for prevalence data, as well as AARP's list of best employers.


Private34235

   
Donating vacation to another employee  
Posted: 02/15/2010 03:31pm  
  

It might be worth a try to contact Kathie Lingle, W@W's authority on work-life programs: 877-951-9191 or kathie.lingle@worldatwork.org.  She is generally aware of cutting edge ideas like this and may know of a U.S. company with a Canadian division.

 


 
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