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How Should Employers Address the Unused Vacation Time Employees Built Up in 2020?

  • Employees frequently left vacation time unused in 2020 due to the COVID-19 pandemic
  • Companies have sometimes made exceptions to their paid time off policies to give workers time to take vacation days
  • Employers considering more permanent policy changes should consider the financial impact as well as the potential for operational disruptions

As the COVID-19 pandemic put greater restrictions on travel in 2020, many employees found themselves with a considerable amount of unused vacation time at the end of the year. The situation has forced employers to consider whether an update is needed to their paid time off policies.

An IPX 1031 survey of 2,000 workers in July found that 92 percent had canceled, postponed, or not booked a vacation due to the pandemic. Sixty-two percent said they were spending less on vacations. Just 27 percent said they had taken a vacation since the pandemic began, while one in five respondents were planning one.

While labor laws on paid time off vary from state to state, companies often have “use it or lose it” policies where any unused vacation time is lost at the end of the year. Some employers are making exceptions due to the unique circumstances of the pandemic, taking steps such as allowing some time to be rolled over.

These changes are often one-time alterations rather than a fundamental policy shift. The Society for Human Resources Management says companies considering a more permanent change in their paid time off policies should carefully consider the effect of the changes, such as the financial impact of allowing employees to cash out unused vacation time. Some companies put a cap on the amount of vacation time that can be rolled over.

SHRM also advises that employers be proactive about reminding employees when they have vacation time available, set up a calendar to show how time off has been assigned, and being open with employees about the company’s operational needs and their inability to approve certain requests.

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