How to calculate earn vacation time for employees in California?
California, because paid vacation is a form of wages, it is earned as labor is performed. An employer’s vacation plan may provide for the earning of vacation benefits on a day-by-day, by the week, by the pay period, or some other period basis.
For example, an employer’s policy may provide that an employee will earn a proportionate share of his or her annual vacation entitlement for each week of a calendar year in which the employee either works at least one full day or receives at least one full days’ pay during such week.
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Thus, for example, if an employee is entitled to two weeks (10 work days) annual vacation, and works full-time, eight hours per day, 40 hours per week, in the above example for each week the employee works at least one full day, he or she will earn 1.538 hours of paid vacation, calculated as follows:
- 10 work days entitlement per year x 8 hours/day = 80 hours vacation entitlement per year
- 80 hours vacation entitlement per year ÷ 52 weeks per year = 1.538 hours of vacation earned per week
In contrast to how vacation pay may be earned, the calculation of vacation pay for terminating employees (a quit, discharge, death, end of contract, etc.) who have earned and accrued and unused vacation on the books at the time of termination must be prorated on a daily basis and must be paid at the final rate of pay in effect as of the date of the separation. For example, an employee who is entitled to three weeks of annual vacation (15 work days entitlement per year x 8 hours/day = 120 hours vacation entitlement per year) who quits on August 7, 2002 (the 219th day of the year) without having taken any vacation in 2002, who has no vacation carry-over from prior years, and whose final rate of pay is $13.00 per hour, would be entitled to $936.00 vacation pay upon separation, calculated as follows:
Pro rata daily basis:
219 days (August 7, 2002, date of quit) ÷ 365 days/year = 60%
60% of 120 hours vacation entitlement = 72 hours vacation earned and accrued through August 7, 2002
Vacation days used in 2002 = 0
Vacation earned but not taken at time of separation = 72 hours
72 hours x $13.00/hour = $936.00 vacation pay due at separation.