Vacation policies come with questions. Among the typical paid time off questions such as is it mandatory to offer vacation time, and how much should I offer, another common question is will I need to pay out any unused vacation time? Common practice and state law around paid time off, and vacation time specifically, vary from company to company and state to state. Let’s take a look at how Michigan handles the payout of unused vacation time.
Payment of Unused Vacation Days at Termination
According to Michigan.gov, “An employer shall pay fringe benefits to or on behalf of an employee in accordance with the terms set forth in the written contract or written policy.”
Remember, vacation days are technically viewed as fringe benefits as paid time off is not a legal requirement. Essentially, an employer is required to stick to the terms outlined in the contract, company policy, or statement an employee signed when they joined the company.
“The employer is required to pay fringe benefits in accordance with written contract or written policy, if the company policy has a pay-out provision which states that unused time will be paid to you when you separate your employment, then the employer would be obligated to pay you for the unused time.
The employer would not be legally obligated to pay you for unused time if the company policy does not address the issue.”
If the employer agreed to pay for unused vacation time in the contract, or according to their company policy, they are required to pay the unused portion on the regularly scheduled payday for the period in which the termination occurred.
Withholding Vacation Pay
Like being required to payout vacation time, employers cannot withhold earned vacation time if the employer stated they do pay out as company policy or in the employee contract. The best practice is to clearly document your company’s vacation policy and disclose it openly to avoid frustration and confusion.
So does Michigan require employers to pay for unused vacation time? Yes, or no, depending on the company and its individual policies. However, it’s always a good idea to consult with local and state statutes to cover all your bases.
If you already have a clearly written and accessible statement on how you treat unused vacation time, pair it with functional Time Off software. Dominion’s Time Off feature allows for customizable policies to fit the needs of your company. Employees can submit a request effortlessly through their Employee Self Service portal and supervisors can approve or deny them at a glance. No matter the size of your business, Dominion’s Time Off feature eliminates paperwork and simplifies requesting time off for everyone involved.