Negative Leave Balance – Should You Allow It?

Woman shrugging

Occasionally, employees need to take more time off than they have accrued. Early time off requests might come up for any number of reasons such as unexpected family visits or holidays soon after being hired. Whatever the reason, it often happens that employees want to take more time off than they have earned. Employers need to decide if negative leave is acceptable for their business.

What Is Negative Leave

If the employer chooses to offer the employee more time-off than he or she has accrued, the employer is essentially offering a loan. The employer is loaning the employee money equivalent to the amount of time that he or she takes off from work. This is probably fine to do in most circumstances but it’s important to maintain some best practices to make sure everyone is on the same page. A written policy helps manage this privilege.

Adding the Negative Leave Policy to the Employee Manual

HR Info Desk offered some guidelines for adding a negative leave policy to the employee handbook:

“Need not be applied to all employees, but it must be applied consistently. The policy should:

  • Provide a set of guidelines that will be used in granting permission to borrow vacation time.
  • State the number of days that can be borrowed.
  • State the permissible reasons for borrowing.
  • Provide a statement that, when resigning, the employee must reimburse the company for a negative time-off balance.
  • Provide the formula that will be used to calculate the amount owed for borrowed time.
  • State the procedure for requesting vacation time. Who must approve it?
  • State that the person approving the request will take into account a department’s staffing needs.
  • Specify the value of the time the employee is receiving.
  • State the factors the person approving the request will rely on to approve or deny the vacation time, such as the employee’s disciplinary and attendance records, and length of service or passage of the probationary period.
  • Specify what the employee is expected to pay back and on what schedule, and the consequence of not doing so.
  • Refer to a written request to borrow vacation time. A prior written agreement should be drafted in accordance with the term of the policy, and with an authorization to be reimbursed from employee’s paycheques; this agreement should be included in the employee file.”

Paying Back the Accrual Loan

Employees can pay back the negative leave in one of two ways. The employee and employer should agree upon the terms before ever taking the accrual loan.

  1. Allow the negative balance to become positive again in time, according to the accrual rate. If time accrues on a monthly or hours-worked basis, then the balance will slowly climb back into the positive. If the accrual rate is once yearly, then it will be positive again at the employee’s anniversary date.
  2. Deduct the leave from the employee’s paycheck. The above requirements would need to be previously agreed upon between the employer and employee. This is not the most common solution but it is an option. Deductions from paychecks can be unsettling so just make sure that this arrangement is agreed upon before letting the accruals go negative.

If you keep track of accruals manually, then you will want to write down the number of hours “borrowed” at the time of the loan. Then at each paycheck, subtract the amount of accrual time earned in that period from the amount that was borrowed. You will do this until the balance owed is eliminated. At this time, the employee will start earning time off again.

If employees have to pay the loan back from their paycheck, multiply the number of hours borrowed by the employee’s hourly rate. This is the amount of the loan. In this case, the employee should continue to accrue time-off as usual.

Let the Software Do the Work

An easier way to track negative leave, of course, is to use an automated accruals system. It’s easier and more accurate. Pieces of paper never get lost and important information is never forgotten. There is never any mistaking the number of hours taken or requested since all of that is documented on the employee’s timesheet.

When employees make requests that bring their accrual balances into the negative, our system simply calculates that negative leave balance. Employees see how much they owe their accrual bank right from their own time sheets. They also see it as it becomes positive again.

We’ll help you get your negative leave policy setup!

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16 Responses

  1. Question:
    in the situation: I still have the negative time on the vacation, but I want to quit the job. I require to pay back that time period, dont’ I? and how to do it?

  2. A friend of mine used vacation hours back in January, right when the renewal vacation hours began. But, the company gave twice the amount of vacation time than he requested, and didnt notify him until yesterday. After using more time off last week, his boss wants him to work for free or pay back what hr over used. This is in California, if that makes a difference.

    1. It may not be legal in California. You should check with an employment lawyer about it. Usually, this kind of arrangement needs to be previously agreed upon.

  3. I’ve discovered that all employees sick time has been accruing incorrectly (prior to my joining the staff), at least since the beginning of 2016. What is the best practice to get accruals back on track?

    1. Hi Liz,

      Can you provide more details? Are the employees getting over or under the amount they should get? Do they have a contract where their expected amounts are listed?

  4. An employee did not have enough sick leave accrued at the beginning of the year, but was sick for 16hrs, and we let it go to negative. She will be leaving the job in 2 weeks, and has a -8 for sick leave. What can we do to get the -8hrs back? Please advise. Thank you.

  5. If a supervisor that has now left the company but while they were over you put your CAL SiCK pay in the negative in ADP and over drew your time to where it accrued 86 hours without your knoledge can you be penalized for this?

  6. If an employee has 8 hours of pto left and requests 48 and the company denies the request. The employee still goes what actions can an employer take in Ca and the employee has been employed less than a year.

    1. I don’t think you’re obligated to pay for time off that the employee doesn’t have. So they can take 6 days off, but you only owe them for 1. The rest of the time is an unexcused absence at worst, or just unpaid time off at best. I would imagine that you could terminate an employee for something like repeated unexcused absence, but to protect yourself, I’d consult with an HR pro. Let us know if you would like a referral.

  7. Im in florida and when i got hired in January i was given 40 hrs of vaction time. I have used 24 hrs of it. I quit my job and now they kept my last check and said it was for repayment of vacation days used. They will send me a bill for the remaimder of the debt. They said its because i quit before dec. 31st

    1. Hi. I’m not sure what your question is here. Are you asking if that is legal? If so, you may have potential breached a employment vacation contract with certain provisions. Based on my research, it looks like Florida law doesn’t necessarily have regulations when it comes to vacation time or payout policies. You may want to speak with your labor board just to see if this is not legally allowed.

  8. So my company is laying us off in 4 days. I was told by HR that I will need to pay back some vacation time i used during the year. Its preaccrued vacation time. He told me it’s a policy in the handbook. I could understand if I quit or was fired for valid reasons but being laid off? I live in NY. I guess employees should read the fine lines in the company handbooks.

  9. Question: I have an exempt employee who has a negative PTO balance which he won’t be able to make up between now and the end of the year. We’ve been docking him 8 hours per pay period to make up for the loaned time we provided. We live in New York State – (not in NYC). Are we legal? We do not have anything in our handbook about how to handle negative balances but we are putting it in the next edition. Thanks so much!

    1. Hi Jean, I would talk to your local labor board to ensure that you’re following protocol correctly from someone who has a deep understanding of rules. Currently there aren’t laws for any vacation, holiday, or sick time in New York State– most policies are agreements between the employee and employer. In regards to a negative balances and deducting hours, it looks as though you can deduct the employees hours; however, you can do this as long as the policy is in writing and the employee agrees to the terms. Take a look at section 193 of the new York State Labor Law, and you’ll have a better understanding.

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