Typical Examples of Vacation/Sick Leave Policy Settings for Hourly and Salaried Employees

Greg Hatfield Updated by Greg Hatfield

Vacation/Sick Leave accrual and tracking is only available to Live Payroll users.

See also, Vacation/Sick Leave Overview, Vacation/Sick Leave Policy Setup, and Vacation/Sick Leave Employee Setup.

The following discussion is to help users understand how to enter policy settings to best match an employer's established Vacation or Sick Leave policy. The sick leave examples presented are based on states or cities which have implemented laws requiring employers to provide paid sick leave. Remember, in most cases an employer's policy does not have to match the state or city minimum policy exactly, but it must be at least as generous in all respects. For example, to simplify accrual record keeping, employers may decide to "front load" the annual sick leave each year by giving each employee the required number of hours on January 1st. Employers must decide if they will match the state or city policy or implement their own policy. Employers must be familiar with the local laws regarding sick leave policies before implementing their own policy.

Note: The policy setup, when accruing a certain number of hours of sick leave or vacation per hours worked, does not allow for accrual of sick leave or vacation to begin on a certain date. Accrual will begin on the next paycheck after the policy has been assigned to an employee. Do not assign a policy to an employee until they are eligible to accrue paid time off.

After establishing a policy, see Manual Adjustments in Vacation/Sick Leave Employee Setup for information on how to enter the employee's current sick leave or vacation balances for employers who already have established policies.

Sick Leave Policy Examples

California - Hourly employees
California has implemented a minimum paid sick leave policy for all employers. Sick leave accrues at the rate of 1 hour per 30 hours worked. Employee accrual may be capped at 80 hours starting in 2024, but they may be restricted to the use of only 40 hours of sick leave per annual period. Note that this is the default sick leave policy that the program creates.

Hourly Employee Policy Setup

Accrues: enter 0.033333 hours and select "per hour worked". This is an accrual rate of 1 hour per 30 hours worked. Note: if the employer is "front loading" the sick leave by giving each employee 40 hours on January 1st, then enter 40 and select "at beginning of year". An Annual Usage Limit is not needed if sick leave is "front loaded". Note: this accrual rate is based on California's rate of 1 hour per 30 hours worked. Some other states and cities have a rate of 1 hour per 40 hours worked. In that case the user should enter 0.025 hours.

Accrual Limit: enter 80 hours. Employees can accrue up to 80 hours. Accrual will stop at 80 hours until some is used.

Hours lost if not used by: leave blank

Annual Usage Limit: enter 40 hours. Employee can only use 40 hours of sick leave in the annual period.

Reset Usage: the user must select when the employer's policy says that the 24 hour annual usage limit will be reset.

- At the beginning of the year: select this if the 40 hour limit will reset each year on January 1st.

- On the Hire anniversary date: select this if the 40 hour limit will reset each year on the employee's hire anniversary date. The user must have entered each employee's hire date on the employee information screen.

- On a specific date: select this if the 40 hour limit will reset each year on a specific date, and enter the month and day in the next field. For example, since California's sick leave law began accrual on 07/01/2015, employers may choose to run the annual period from 7/1 to 6/30.

- Or later of 90 days after employee's hire date: California law allows a probationary period of 90 days until the employee is eligible to use their accrued sick leave. Enter 90.

Note: An employer may choose to run the annual period for existing employees from 7/1 to 6/30, and to use an annual period based on the hire anniversary date for new hires. In this case two policies must be set up and assigned to the two groups of employees. Other employers may choose to simplify it and use a calendar annual period for all employees. Follow whatever the employer's written policy states.

Hours for these income items will count towards accrual: check the income items for which hours worked count towards sick leave accrual. Typically this would be Regular and Overtime pay. When entering paychecks, hours must be entered in order to accrue sick leave if the policy is "per hour worked".

Hours for these income items will count as usage: check the income items for which hours will count as using sick leave. Typically this would be Sick Pay (hourly). If the employer does not have a Sick Pay income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Sick Pay (hourly). Then return to the policy setup screen and check the Sick Pay income item for usage. When entering checks for the employee, be sure to enter the pay rate for sick pay on the employee rates tab.

California - Salaried employees
Note: Salaried employees can be assigned the same policy as described above for hourly employees. However, because the user may not want to enter paycheck hours for salaried employees, the following may be a more simple alternative policy setup.

Accrues: enter 69.33 hours and select "annually (each pay period)". Assuming that the each salaried employee always works 40 hours per week, then they work 2080 hours per year (40 x 52 weeks). In one year an employee who works 2080 hours will accrue 69.33 hours of sick leave (2080 / 30 hours). This setting will allow an employee paid biweekly to accrue 2.667 hours of sick leave each pay period (69.33 / 26 pay periods). This is the equivalent of the hourly employee working 80 hours in the two week period and accruing 2.667 hours of sick leave (80 x 0.033333). This works for all pay periods: weekly, biweekly, semimonthly, monthly, etc.). Note: If the salaried employee does not work 40 hours per week, then the annual hours worked must be divided by 30 to determine the number of annual hours to enter. If salaried employees have different accrual rates, then multiple policies will be needed.

Note: The rate entered is based on California's rate of 1 hour per 30 hours worked. Some states and cities have a rate of 1 hour per 40 hours worked. In that case enter 52 hours (2080 / 40).

Accrual Limit: enter 80 hours. Employees can accrue up to 80 hours. Accrual will stop at 80 hours until some is used.

Hours lost if not used by: leave blank

Annual Usage Limit: enter 40 hours. Employee can only use 40 hours of sick leave in the annual period.

Reset Usage: the user must select when the employer's policy says that the 40 hour annual usage limit will be reset.

- At the beginning of the year: select this if the 40 hour limit will reset each year on January 1st.

- On the Hire anniversary date: select this if the 40 hour limit will reset each year on the employee's hire anniversary date. The user must have entered each employee's hire date on the employee information screen.

- On a specific date: select this if the 40 hour limit will reset each year on a specific date, and enter the month and day in the next field. For example, since California's sick leave law began accrual on 07/01/2015, employers may choose to run the annual period from 7/1 to 6/30.

- Or later of 90 days after employee's hire date: California law allows a probationary period of 90 days until the employee is eligible to use their accrued sick leave. Enter 90.

Note: An employer may choose to run the annual period for existing employees from 7/1 to 6/30, and to use an annual period based on the hire anniversary date for new hires. In this case two policies must be set up and assigned to the two groups of employees. Other employers may choose to simplify it and use a calendar annual period for all employees. Follow whatever the employer's written policy states.

Hours for these income items will count towards accrual: Not needed. This is not used because the policy is not "per hour worked". The user does not have to enter the hours worked when entering the paycheck, which simplifies data entry and sick leave accrual.

Hours for these income items will count as usage: check the income items for which hours will count as using sick leave. Typically this would be Sick Pay (salary). If the employer does not have a Sick Pay income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Sick Pay (salary). Be sure to check the option to "Display Hours Column". Then return to the policy setup screen and check the Sick Pay income item for usage. To simplify matters for salaried employees, we recommends that the user enter $0 for the Sick Pay (salary) on the employee rates tab. Then when entering paychecks, the user should enter the full salary in the Salary pay field, and if using sick leave, they only need to enter the Sick Pay (salary) Hours in the paycheck grid. The pay for sick pay will calculate as zero so no adjustment will be needed for the Salary field.
New York City - Hourly employees
New York City implemented a minimum paid sick leave policy for most employers. The policy started in 2014. Sick leave accrues at the rate of 1 hour per 30 hours worked. Employee accrual may be capped at 80 hours (they may carry over 40 hours to the next year), but they may be restricted to the use of only 40 hours of sick leave per calendar year.

Hourly Employee Policy Setup

Accrues: enter 0.033333 hours and select "per hour worked". This is an accrual rate of 1 hour per 30 hours worked. Note: if the employer is "front loading" the sick leave by giving each employee 40 hours on January 1st, then enter 40 and select "at beginning of year". An Annual Usage Limit is not needed if sick leave is "front loaded". Note: this accrual rate is based on New York City's rate of 1 hour per 30 hours worked. Some other states and cities have a rate of 1 hour per 40 hours worked. In that case the user should enter 0.025 hours.

Accrual Limit: enter 80 hours. Accrual will stop at 80 hours until some is used. This will allow employees to carry over 40 hours to the next year after 40 hours are used.

Hours lost if not used by: leave blank

Annual Usage Limit: enter 40 hours. Employee can only use 40 hours of sick leave in the calendar year.

Reset Usage: select "at the beginning of year". New York City law indicates that each calendar year period the employee is allowed up to 40 hours of sick leave.

Or later of 120 days after employee's hire date: New York City law allows a probationary period of 120 days until the employee is eligible to use their accrued sick leave. Enter 120.

Hours for these income items will count towards accrual: check the income items for which hours worked count towards sick leave accrual. Typically this would be Regular and Overtime pay. When entering paychecks, hours must be entered in order to accrue sick leave if the policy is "per hour worked".

Hours for these income items will count as usage: check the income items for which hours will count as using sick leave. Typically this would be Sick Pay (hourly). If the employer does not have a Sick Pay income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Sick Pay (hourly). Then return to the policy setup screen and check the Sick Pay income item for usage. When entering checks for the employee, be sure to enter the pay rate for sick pay on the employee rates tab.
New York City - Salaried employees
Note: Salaried employees can be assigned the same policy as described above for hourly employees. However, because the user may not want to enter paycheck hours for salaried employees, the following may be a more simple alternative policy setup.

Accrues: enter 69.33 hours and select "annually (each pay period)". Assuming that the each salaried employee always works 40 hours per week, then they work 2080 hours per year (40 x 52 weeks). In one year an employee who works 2080 hours will accrue 69.33 hours of sick leave (2080 / 30 hours). This setting will allow an employee paid biweekly to accrue 2.667 hours of sick leave each pay period (69.33 / 26 pay periods). This is the equivalent of the hourly employee working 80 hours in the two week period and accruing 2.667 hours of sick leave (80 x 0.033333). This works for all pay periods: weekly, biweekly, semimonthly, monthly, etc.). Note: If the salaried employee does not work 40 hours per week, then the annual hours worked must be divided by 30 to determine the number of annual hours to enter. If salaried employees have different accrual rates, then multiple policies will be needed.

Note: The rate entered is based on New York City's rate of 1 hour per 30 hours worked. Some states and cities have a rate of 1 hour per 40 hours worked. In that case enter 52 hours (2080 / 40).

Accrual Limit: enter 80 hours. Accrual will stop at 80 hours until some is used. This will allow employees to carry over 40 hours to the next year after 40 hours are used.

Hours lost if not used by: leave blank

Annual Usage Limit: enter 40 hours. Employee can only use 40 hours of sick leave in the calendar year.

Reset Usage: select "at the beginning of year". New York City law indicates that each calendar year period the employee is allowed up to 40 hours of sick leave.

Or later of 120 days after employee's hire date: New York City law allows a probationary period of 120 days until the employee is eligible to use their accrued sick leave. Enter 120.

Hours for these income items will count towards accrual: Not needed. This is not used because the policy is not "per hour worked". The user does not have to enter the hours worked when entering the paycheck, which simplifies data entry and sick leave accrual.

Hours for these income items will count as usage: check the income items for which hours will count as using sick leave. Typically this would be Sick Pay (salary). If the employer does not have a Sick Pay income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Sick Pay (salary). Be sure to check the option to "Display Hours Column". Then return to the policy setup screen and check the Sick Pay income item for usage. To simplify matters for salaried employees, we recommends that the user enter $0 for the Sick Pay (salary) on the employee rates tab. Then when entering paychecks, the user should enter the full salary in the Salary pay field, and if using sick leave, they only need to enter the Sick Pay (salary) Hours in the paycheck grid. The pay for sick pay will calculate as zero so no adjustment will be needed for the Salary field.
San Francisco - Hourly employees
San Francisco implemented a minimum paid sick leave policy for most employers in 2007. Sick leave accrues at the rate of 1 hour per 30 hours worked. Employee accrual is capped at 40 hours for employers with less than 10 employees, and is capped at 72 hours for employers with 10 or more employees. There is no annual usage limit, only an accrual cap.

Hourly Employee Policy Setup

Accrues: enter 0.033333 hours and select "per hour worked". This is an accrual rate of 1 hour per 30 hours worked. Note: if the employer is "front loading" the sick leave by giving each employee the sick leave hours, on January 1st, then enter 40, or 72, and select "at beginning of year". Note: this accrual rate is based on San Francisco's rate of 1 hour per 30 hours worked. Some other states and cities have a rate of 1 hour per 40 hours worked. In that case the user should enter 0.025 hours.

Accrual Limit: enter 40 hours or 72 hours depending on the size of the employer. Accrual will stop at this limit until some is used.

Hours lost if not used by: leave blank

Annual Usage Limit: leave blank. There is no annual usage limit, only an accrual cap.

Reset Usage: leave blank.

Hours for these income items will count towards accrual: check the income items for which hours worked count towards sick leave accrual. Typically this would be Regular and Overtime pay. When entering paychecks, hours must be entered in order to accrue sick leave if the policy is "per hour worked".

Hours for these income items will count as usage: check the income items for which hours will count as using sick leave. Typically this would be Sick Pay (hourly). If the employer does not have a Sick Pay income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Sick Pay (hourly). Then return to the policy setup screen and check the Sick Pay income item for usage. When entering checks for the employee, be sure to enter the pay rate for sick pay on the employee rates tab.
San Francisco - Salaried employees
Note: Salaried employees can be assigned the same policy as described above for hourly employees. However, because the user may not want to enter paycheck hours for salaried employees, the following may be a more simple alternative policy setup.

Accrues: enter 69.33 hours and select "annually (each pay period)". Assuming that the each salaried employee always works 40 hours per week, then they work 2080 hours per year (40 x 52 weeks). In one year an employee who works 2080 hours will accrue 69.33 hours of sick leave (2080 / 30 hours). This setting will allow an employee paid biweekly to accrue 2.667 hours of sick leave each pay period (69.33 / 26 pay periods). This is the equivalent of the hourly employee working 80 hours in the two week period and accruing 2.667 hours of sick leave (80 x 0.033333). This works for all pay periods: weekly, biweekly, semimonthly, monthly, etc.). Note: If the salaried employee does not work 40 hours per week, then the annual hours worked must be divided by 30 to determine the number of annual hours to enter. If salaried employees have different accrual rates, then multiple policies will be needed.

Note: The rate entered is based on San Francisco's rate of 1 hour per 30 hours worked. Some states and cities have a rate of 1 hour per 40 hours worked. In that case enter 52 hours (2080 / 40).

Accrual Limit: enter 40 hours or 72 hours depending on the size of the employer. Accrual will stop at this limit until some is used.

Hours lost if not used by: leave blank

Annual Usage Limit: leave blank. There is no annual usage limit, only an accrual cap.

Reset Usage: leave blank.

Hours for these income items will count towards accrual: Not needed. This is not used because the policy is not "per hour worked". The user does not have to enter the hours worked when entering the paycheck, which simplifies data entry and sick leave accrual.

Hours for these income items will count as usage: check the income items for which hours will count as using sick leave. Typically this would be Sick Pay (salary). If the employer does not have a Sick Pay income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Sick Pay (salary). Be sure to check the option to "Display Hours Column". Then return to the policy setup screen and check the Sick Pay income item for usage. To simplify matters for salaried employees, we recommends that the user enter $0 for the Sick Pay (salary) on the employee rates tab. Then when entering paychecks, the user should enter the full salary in the Salary pay field, and if using sick leave, they only need to enter the Sick Pay (salary) Hours in the paycheck grid. The pay for sick pay will calculate as zero so no adjustment will be needed for the Salary field.

Vacation Policy Example

In a typical vacation policy, an employee may earn two weeks of vacation on January 1st. After the employee works a certain number of years for the employer, the employee may earn three, four, or more weeks of vacation. Each differing number of weeks requires a separate policy. The user must then assign the appropriate policy to each employee. A policy earned two weeks per year is described below. Note that this is the default vacation policy that the program creates.

Hourly employees - Two weeks
Accrues: enter 80 hours and select "at beginning of year". This is accrues 80 hours, or two weeks, of vacation on the first paycheck of the year.

Accrual Limit: enter the maximum number of hours that the employee can accrue. For example, if the employer allows the employee to carry over two weeks, 80 hours, of unused vacation, then the Accrual Limit would be 160 hours (80 hours carried over plus 80 hours additional accrued on January 1st).

Hours lost if not used by: leave blank

Annual Usage Limit: leave blank. Vacation usage is typically limited only by how much is accrued.

Reset Usage: leave blank.

Hours for these income items will count towards accrual: Not needed. This is not used because the policy is not "per hour worked". The user does not have to enter the hours worked when entering the paycheck, which simplifies data entry and vacation accrual.

Hours for these income items will count as usage: check the income items for which hours will count as using vacation. Typically this would be Vacation (hourly). If the employer does not have a Vacation income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Vacation (hourly). Then return to the policy setup screen and check the Vacation income item for usage. When entering checks for the employee, be sure to enter the pay rate for vacation on the employee rates tab.
Salaried employees - Two weeks
Note: Salaried employees can be assigned the same policy as described above for hourly employees. Only the following change is suggested.

Hours for these income items will count as usage: check the income items for which hours will count as using vacation. Typically this would be Vacation (salary). If the employer does not have a Vacation income item, then go to the Add/Edit Client screen. On the Payroll Setup tab, add an income item for Vacation (salary). Be sure to check the option to "Display Hours Column". Then return to the policy setup screen and check the Vacation income item for usage. To simplify matters for salaried employees, we recommends that the user enter $0 for the Vacation (salary) on the employee rates tab. Then when entering paychecks, the user should enter the full salary in the Salary pay field, and if using vacation, they only need to enter the Vacation (salary) Hours in the paycheck grid. The pay for vacation will calculate as zero so no adjustment will be needed for the Salary field.

 

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Vacation and Sick Leave in LivePayroll

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