Legal View: For sale: Two extra vacation weeks

Rich Meneghello, The Daily Record Newswire

Employers are at their best when they are trying to stay one step ahead of the competition, seeking new and creative ways to get the job done as well as innovations able to improve end results. This is especially true for employee benefits, which are crucial in attempts to attract and retain the best talent.

This month, rather than scare managers and business owners with another horror story of a lawsuit gone bad or a new, onerous law to deal with, I want to share information about a growing trend across the country. It’s a new way of looking at benefits: the buying and selling of vacation time.

An increasing number of employers are offering an employee benefits plan that allows workers to wheel and deal to accumulate more vacation time or unload time they aren’t going to use for a little bit of extra cash. A recent study by the Society for Human Resource Management found that 9 percent of employers allowed workers to sell their unused vacation back to the company in exchange for more money, and 5 percent of companies allowed their employees to buy extra vacation time through a payroll deduction.

Innovative and enterprising heads of business are always looking for the latest trend – some sort of way to exploit the market to their gain. This could be the wave of the future, and those that jump on soonest are the likeliest to benefit in the short and long term.

These plans can be structured in various ways. Some employers place a limit on how much extra vacation time employees can purchase — usually one or two weeks. Some employers that allow time to be sold back structure it so that it goes into a pool for general use, and the amount of time others can buy is limited to this amount.

In Oregon, and in other states where payroll deductions are regulated tightly, employers will want to make sure that the deduction agreement is in writing and signed by the employee. Also, in the extreme scenario where a deduction would bring the employee below effective minimum wage, that reduction cannot be allowed and employers will need to figure out another way to recoup the money (or will need to prohibit the buying/selling of vacation time in situations where it could cause this issue to arise).

Some of the more enterprising companies are even taking it one step further. Rather than just limiting the buying and selling to vacation time, some allow employees to sell back their time off they aren’t going to use in exchange for some other type of employee benefit they might covet more, such as disability or life insurance credits. The companies allow workers to accumulate credits used to buy these extra benefits and then trade in the credit equivalent of those vacation days for the benefits. The possibilities are virtually endless.

The advantages to these plans are fairly obvious, but cannot be overstated. Allowing workers more flexibility in managing their time off is highly appealing to a vast majority of employees. Not only do employees appreciate the ability to take more time off, but many employers find that workers who regularly take vacation demonstrate increased productivity when at the office, as the time off gives them a chance to refresh and renew.

As more and more “Generation Y” workers – 20-somethings and those in their early 30s – are hired, employers are finding it difficult to adapt to their needs and wants. Time and time again, workplace studies show that younger employees want flexibility. This benefit could be a perfect fit for Gen Y.

Employers can sell this benefit as an inducement to attract or retain workers by showing that they do not offer a cookie-cutter benefits package, but instead offer one that can be adjusted and adapted to meet the needs of the individual employee. An “a la carte” benefits system can be especially attractive to individuals who want to forge their own idea of what a workplace should look like.

This is somewhat reminiscent of the trend in the HR world that swept the country about 10 or 15 years ago, when many employers established a “PTO” plan offering employees one single bank of “paid time off” for vacation, sick and personal days taken off from work rather than separate buckets of time for each category. Creating a single comprehensive plan is sometimes easier to administer, easier to understand from an employee’s perspective, and more attractive to workers who want flexibility in their work/life balance.

In 2002, only 28 percent of companies offered PTO plans for their workforce. That number jumped to 42 percent in 2009, and is now up to 52 percent in 2013. Certainly the trend in this country is to offer more flexibility to your workers; the question is whether you are going to be on the forefront of this trend or whether it will be 10 years from now until you catch on.


Rich Meneghello is the managing partner of the Portland office of Fisher & Phillips LLP, one of the oldest and largest employment law firms in the country dedicated to representing the interests of management. Contact him at or 503-205-8044, or follow him on Twitter – @pdxLaborLawyer.