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Managing Unused Paid Leave During COVID-19

Key Points about managing unused paid leave when returning to work:

  • The COVID-19 pandemic is still in full swing and many employees’ vacations are being cancelled as a result. 
  • You may notice that employees aren’t taking paid time off like they usually do. If you’re worried about how to manage an excess of unused paid leave, you have a few options. 
  • You can ask employees to take their leave by a set date, pay them for unused leave, or let them “donate” accrued leave to other employees.

With remote work at its peak and the pandemic derailing vacation plans, many employees are choosing to let their paid leave accrue. Instead of taking time off for summer vacations, many are saving it with the hopes of using it at a later date. 

But this situation can create problems for businesses, especially those still recovering from the economic downturn caused by COVID-19. An excess of unused paid time off can impact your business’s finances and operations. It can be even more concerning if you pay employees for unused leave upon separation or if everyone wants off at the same time.

If you’re worried about how to manage unused paid time off, you have a few options. The following policies can help you manage an excess of paid leave. 

Please note any state or local laws as they apply to your paid leave policy to ensure you stay compliant.

Require Employees to Use Accrued Time Off by a Set Date

As long as local and state laws permit, you can generally require your employees to use paid time off, as long as your policy is non-discriminatory and consistent. 

If you want employees to use vacation time, you can require them to use a certain amount of hours or days before a set date. For example, you might request employees to use 40 hours of leave before the end of August. 

Of course, some employees won’t be happy about this, but it’s one way you can reduce the amount of accrued leave and ensure your employees get some rest.

This policy works best for businesses that have a “use it or lose it” policy and want to avoid a scenario where all employees try to use their paid leave at the same time, such as the Thanksgiving and holiday seasons. 

Compensate Employees for Unused Paid Leave

Another option is to compensate employees for accumulated and unused paid leave. Employees receive compensation for accrued leave instead of the actual time off.

This policy works best for busy businesses where employees may find it difficult to take time off while managing their workloads. If your business permits carryover, this policy can also help you deplete the amount of paid leave that workers bring with them into the next year.

Give Employees the Option to Donate Their Time Off

You can also give employees the option to donate their accrued time off to other employees. Essentially, volunteers can donate their accrued paid leave to a shared pool. Employees who need additional leave for emergencies can then receive some of those donated hours. 

If you choose to implement a policy like this one, it must be optional, and there are additional requirements you would need to put in place. For instance, include under what circumstances an employee can receive donated leave. Also state the limits for how much an individual employee can donate and how much an individual employee can receive. To view SHRM’s (Society for Human Resource Management) example policy that you can use as a template, please click here.

This policy works well as an addition to your existing policy or either of the policies above.

Introduce Adjustments to Your Current Policy

If you don’t need to change your policy drastically, adjusting your current policy can still make your life easier. As always, consult a legal advisor and check your local and state requirements before implementing any new changes.

  • To reduce the amount of people out at the same time, set a limit of how many employees may be out at once. It may be helpful to break it down by department or team.
  • To make sure employees are available, set blackout dates (within reason). These are blocks of days where employees cannot take time off unless they have an emergency. This works best when there’s a heavy workload and employee absence would negatively impact operations. 
  • To prepare for an employee’s absence, require employees to give you due notice of their leave plans. You’ll then have time to work ahead or find a replacement.
  • To keep your workplace safe, ask employees where they’re travelling. If employees take time off and go on a vacation, you need to know if they should self-quarantine before returning to the workplace. 

From a financial standpoint, there is no easy solution for your business when dealing with unused paid leave. If you make changes to your paid leave policy, clearly outline your new guidance. Then, share it with employees so they know what to expect and can plan their time off accordingly.

Of course, you should only change your paid leave policy if it’s absolutely necessary. An unnecessary change on top of everything else going on in the world can cause your employees undue stress. If you can offer more paid leave flexibility, instead of less, your employees will thank you.


If you’re preparing to return to work soon, check out our Return to Work Checklist, which includes best practices for safely reopening your business during COVID-19.