Vacation and Sick Leave

Most vacation and sick leave policies are written in one of two ways. Days off are either earned over time (accrued) or are granted on a certain date, such as January 1 or an employee’s hire date. If vacation days are granted before employees earn them, and you don’t want to pay for unearned vacation time upon termination or separation from employment, it’s important to specify this in your policy.

If the policy doesn’t address the payment of unearned vacation time upon termination or separation, you may be legally required to pay for all unused vacation time. Including the following sample language can address this situation:

  • “Vacation days are granted on January 1 of each year. While vacation days are available on January 1, the number of vacation days available for payout upon separation from this organization will be prorated, based on the months of service in that year.”
  • “If an employee has not used all his or her allotted vacation days by the last day of employment, the remaining vacation days will be prorated and paid to the employee. If the last day of employment is before July 1, and an employee has used more than the allotted vacation days, the employee is expected to reimburse this organization for the cost of the excess vacation time that was used. Employees leaving this organization after July 1 will not be required to reimburse this organization for excess vacation days used and will receive all remaining prorated vacation time, if applicable. In order to avoid repayment situations, employees intending to terminate employment with this organization before July 1 should meet with human resources to determine the prorated number of vacation days.”

Your organization will want to consult a locally licensed attorney to confirm that your vacation and sick leave policies comply with state and local law.


(Name of organization) will grant vacation and sick leave to full-time employees on January 1 of each calendar year, according to the following schedule:

First Calendar Year of Employment

Hire Date # of Days   Eligibility Date
1st Quarter Sick
Date of Hire
April 1
2nd Quarter Sick
Date of Hire
July 1
3rd Quarter Sick
Date of Hire
October 1
4th Quarter Sick
Date of Hire
Calendar Year # of Days # of Vacation Days
2 (hired 1st Quarter) 4 6
2 (hired 2nd Quarter) 4 5
2 (hired 3rd Quarter) 4 4
2 (hired 4th Quarter) 4 3
3 4 7
4 4 7
5 4 8
6 4 8
7 4 9
8 4 9
9 4 10
10 Years + 4 11



Part-time employees (20 hours or more)
If you are a part-time employee and work 20 hours or more during the year, you will be granted a pro-rated portion of sick and vacation time based on your annual average of hours worked during the prior calendar year.

Carryover of Days
Full-time employees may carry over the following number of days each calendar year:

  • 5 sick days
  • 5 vacation days

Part-time employees eligible for vacation and sick time may carry over the following number of days each calendar year:

  • 2.5 sick days
  • 2.5 vacation days

Sick Leave
Sick leave may be used only for health care appointments, personal illness, or the illness of a close family member. A close family member includes a parent, child, or spouse of the employee or a parent or child of the employee’s spouse. Sick leave will not be paid to employees when they leave employment with this organization.

Vacation Time
Vacation time may be used for vacation, personal business, or additional sick leave once the allotted sick days have been exhausted. Vacation time should primarily be used for scheduled absences and should be approved by the manager at least 24 hours in advance. You are expected to receive managerial approval prior to taking any vacation time. Managers have discretion when approving vacation time. Seniority is one factor that managers may consider, but they are not required to consider seniority in making their decision. Employees are generally required to exhaust all vacation time before unpaid time off will be granted.

Note: Be sure that your policy explains how vacation time will or won’t be paid to employees when they separate from the organization.

Optional: Vacation Length
In order for employees and this organization to derive the fullest benefits desired from vacation, the employee is encouraged to take at least one week of eligible vacation in consecutive days if the employee has earned at least 10 days of vacation time. An employee may use vacation and holidays together to satisfy the “one week of vacation” encouragement. Employees will be paid for any earned and unused vacation days upon voluntary separation of employment with this organization.


  • If an employee exhausts all sick leave and is subsequently ill, the employee will generally be required to use available vacation time. Unless the illness qualifies under the Family and Medical Leave Act, employees are generally not permitted to take unpaid time for illness when vacation time is available.
  • While vacation time can be used for illness once sick leave has been exhausted, an employee generally may not use sick leave for anything except the following: personal illness, the illness of a close family member, or a qualifying event under the Family and Medical Leave Act.
  • An illness occurring during a scheduled vacation will not be counted as sick leave.

This is a sample handbook policy only. Your organization is responsible for compliance with all applicable laws. Accordingly, this document should not be used or adopted by your organization without first being reviewed and approved by a licensed attorney in your area. Brotherhood Mutual assumes no liability in preparation and distribution of this sample document.

Working Together © 2022 Brotherhood Mutual Insurance Company. All rights reserved. Updated 9/2021.