Pay-in-Lieu for Personal Leave

St Bens · August 2003

Are there specific IRS guidelines that regulate the pay-in-lieu option for personal leave balances? Is it required to request pay-in-lieu in the calendar year prior to the actual pay-out? Does anyone have the exact location in the IRS regs where this topic can be researched? Our poloicy allows pay-in-lieu twice a year, minimum balance required before and after pay-out, must have at least 5 service years to be eligible.

Hunter1 · August 2003

Since there's no federal requirement for personal leave, I doubt that there would be any requirement for pay in lieu of notice. It seems to me that it would just be taxable income in the year it's paid.

Pork · August 2003

It is in your company policy and benefits manuals where you will find what you can and can not do. We pay vacation time out after it is awarded, upon the request of the individual which is approved by the supervisor/manager. Our computer then automatically calculates and pays IRS. They are glad to get the income. We also pay out sick time not used at the end of the medical benefits year which is November. Thus the employee can count on a little sick time Christmas club money in December. We, previously, did not do this for exempts, however, to my questioning the procedure we now also pay out vacation time to management who want to sell back their vacation time. As a business it makes sense to pay out over time so that employees do not loose and the company does not get hit with an expense item unbudgetted all in one year or one quarter. Our wage grade employees typically "sell back" in the week after it is awarded. Cash is more valuable to them than time off. They look at it as a double time week if they work and also collect the vacation time paid.

Hope this helps!

PORK

Pay-in-Lieu for Personal Leave

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