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Buy/Sell/Donate vacation hours amongst Employees
Benefits & Compensation
Buy/Sell/Donate vacation hours amongst Employees
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
We are evaluating if we can offer a volunteer vacation buy/sell/donate vacation hours for employees to employees. Many of the research we have found relate to buy/sell with the employer. It would be t
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Forums » Topic Forums » Benefits & Compensation » Buy/Sell/Donate vacation hours amongst Employees
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/1/2011 11:33 AM EDT
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Posts: 4
First: 6/1/2011 Last: 6/3/2011 |
We are evaluating if we can offer a volunteer vacation buy/sell/donate vacation hours for employees to employees. Many of the research we have found relate to buy/sell with the employer. It would be transacted like a WANT/SELL ad posted anonymously via our intranet. Are there any tax implications we are missing? Is this a doable benefit? Trying to think outside of the box so that employees can leverage more flexibility of unused vacation. |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 5:14 AM EDT
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Posts: 237
First: 7/10/2007 Last: 8/31/2011 |
Donating vacation is fairly common in the public sector. My sister (federal employee) talked about doing so. Important thing seems to be to have rules to prohibit possible managemet abuses (forcing emplloyees to donatedays to them).
Cashing in vacation/sick days is permitted by some companies, but most feel it's important that staff use their vacation. I worked for a compnay once that permitted employees ot cash in sick days at the end of the year at 50% value. I'm sure you'll get more feedback as to the pluses and minuses. |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 7:17 AM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Honestly, I think about the administration of this and think it would become a nightmare very quickly. Who is going to track vacation time? How are they going to edit it? Do both sides have to agree to the transaction? Who decides how much a day is worth? What happens if the two parties make differing levels of pay?
For example a higher paid employee could more likely afford to buy vacation days from a lower paid employee who wants both pay for the worked day and the extra cash of a non-taken PTO day. This leads to more PTO of the higher paids at a higher rate to the employer and getting more time off. Which in most places, they already do due to level and length of service. The only time I would be willing to deal with this is if the PTO was made for donations to go into a pool and have a committee and rules/policies on when time from that pool are donated to needy individuals. And I am not so sure that any payment between employees would not be taxable to the employee receiving the payment...just as if the employer were reimbursing the employee. And like the PP stated, there could always be abuse where a boss forces or manipulates an employee to sell PTO credits. This is a large can of worms....I would not suggest opening it! |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 7:17 AM EDT
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Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
I don't like these policies, but I'm not in HR. My issue with them is that employees need to take MORE time off, or at least what they are alotted. If an extraoridnary circumstance comes up, be a good employer and make an exception. Don't put it on the backs of your employees. |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 8:05 AM EDT
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Posts: 4
First: 6/1/2011 Last: 6/3/2011 |
Thank you all for the input and responses. We do encourage employees to take time off, that is our number 1 priorities. This will be a voluntary benefit, so employees can opt in if they have vacations available and they would like to sell the excess or those that do not have enough would purchase the shortfall. The program for sell/buy are only for Director levels and below. We've already have a cash out benefit in place for yearend but restricted to only 40 hours that the company will cash out. So I am looking for more options that does not add real additional cost to the employer but the ability for the employee to transact amoungst themselves. We already have a HRIS system in place that tracks hours per employee so that part is easy. The issue that came up which I cannot find online is that if there is a difference in pay grade, does that incur some tax liability issue. The program would be driven by supply and demand of vacation hours. Let say someone want to sell 40 hours for $500, it will be posted as "Item 0001 40 hours for sale @ $500" on our intranet. And let say someone wants to buy that Item listed, will contact HR for that available hours. HR will then deduct $500 "pretaxed" from the buyer's gross payroll and add the $500 "pretaxed" to the sell's gross payroll, so appropriate taxes are taken out based on their level of income. Once that is completed, HR will transfer the 40 hours balance from seller account to the buyer account. When the buyer uses the 40 hours of purchased vacation, taxes are taken out based on 40 hours of vacation taken at the buyer's prevailing rate. |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 9:29 AM EDT
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Posts: 2442
First: 2/12/2000 Last: 9/14/2011 |
"HR will then deduct $500 "pretaxed" from the buyer's gross payroll and add the $500 "pretaxed" to the sell's gross payroll, so appropriate taxes are taken out based on their level of income. Once that is completed, HR will transfer the 40 hours balance from seller account to the buyer account. When the buyer uses the 40 hours of purchased vacation, taxes are taken out based on 40 hours of vacation taken at the buyer's prevailing rate."
I am not aware of any IRS rules that state that an employee can purchase time directly from someone other than their employer. So this may not be a pre tax purchase. You may have to set this up so that when the parties agree the company is the middleman. The seller sells to the employer and the buyer buys from the employer. You must make sure you run this past an ERISA and Tax attorney. |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 10:27 AM EDT
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Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
Sounds like an awful lot of work. What are you trying to gain by implementing such a program?
Most employers that I've come across that had buy/sell time off programs had it done through a cafeteria plan for tax reasons. Most of the plans had a cap on the number of days (3 or 4) an employee could buy or sell, so it wasn't too bad. I would recommend checking with your cafeteria/Section 125 plan administrator. |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/2/2011 2:46 PM EDT
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Posts: 4
First: 6/1/2011 Last: 6/3/2011 |
Essentially we are the middle man in this process but was not sure if we need to process it pre-tax or post-tax transaction. It would not fall into the Caf125 plan because it is really not for tax benefit and probably would not considered to be eligible under the parameters. The goal of this is to allow the employee another option to have more flexibility of their vacation available hours in addition to the the cash out option annually of 40 hours. This will add another 40 hours they can redeem some cash value if they are not using it since vacation accrual caps at 1 1/2 of their annual accrual.
If we are to be the middle man, is there a IRS rule that we must pay a certain rate for those hours, i.e based on their rate of pay or can we purchase it at the rate that the seller is willing to sell. Also we would only "buy" the hours from the employee if there is also a counter confirmed buyer. They may opt to participate but if there is no buyer then the hours will stay in their account and no transaction will be processed. I have not found any ERISA rule that governs this so I am inquiring from the field to see if I can tap into the vast knowledge that is out there plus I cannot incurred cost from a tax attorney since we have no budget... |
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Buy/Sell/Donate vacation hours amongst Employees
posted at 6/3/2011 5:39 AM EDT
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Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
I would say 2 words: opportunity cost. What you're trying to do is fairly complex and I highly doubt you're going to get as much bang for your buck as you think. Why not allow employees to buy or sell vacation days directly from or to the employer? That way you don't have to worry about matching buyers with sellers and you can meet everyone's needs. I know this can be done via a cafeteria plan.
By the way, I'd be extremely hesitant to try and set this up yourself, regardless of what postings you find here. You're right, there is vast knowledge from a number of posters on here, but I wouldn't risk being out of compliance with some part of your plan. |
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