Q: When an employee terminates, do we have to pay their vacation accrual pay based on their current rate, or can we pay the rate when the vacation was earned?
A: To determine at what rate to pay out accrued vacation, check your company handbook. Does it cover the pay out vacation rate? Although you can check your records for past practices, you’ll want a documented reason why that could hold up to an allegation of discrimination or retaliation.
If it isn’t in your handbook now, when you revise it, cover your bases by including a policy or language about vacation payout. Most employers pay an employees’ pay rate at separation. Some states defer to company policy while others mandate if paid time off is payable upon termination. Be sure your policy is compliant in the state your employee works.