Negative Leave Balance – Should You Allow It?

Let’s Talk Business Kingmaker Society Community Chat Negative Leave Balance – Should You Allow It?

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    Occasionally, employees need to take more time off than they have accrued. Early time off requests might come up for any number of reasons such as unexpected family visits or holidays soon after being hired. Whatever the reason, it often happens that employees want to take more time off than they have earned. Employers need to decide if negative leave is acceptable for their business.

    What Is Negative Leave

    If the employer chooses to offer the employee more time-off than he or she has accrued, the employer is essentially offering a loan. The employer is loaning the employee money equivalent to the amount of time that he or she takes off from work. This is probably fine to do in most circumstances but it’s important to maintain some best practices to make sure everyone is on the same page. A written policy helps manage this privilege.

    Adding the Negative Leave Policy to the Employee Manual

    HR Info Desk offered some guidelines for adding a negative leave policy to the employee handbook:

    “Need not be applied to all employees, but it must be applied consistently. The policy should:

    • Provide a set of guidelines that will be used in granting permission to borrow vacation time.
    • State the number of days that can be borrowed.
    • State the permissible reasons for borrowing.
    • Provide a statement that, when resigning, the employee must reimburse the company for a negative time-off balance.
    • Provide the formula that will be used to calculate the amount owed for borrowed time.
    • State the procedure for requesting vacation time. Who must approve it?
    • State that the person approving the request will take into account a department’s staffing needs.
    • Specify the value of the time the employee is receiving.
    • State the factors the person approving the request will rely on to approve or deny the vacation time, such as the employee’s disciplinary and attendance records, and length of service or passage of the probationary period.
    • Specify what the employee is expected to pay back and on what schedule, and the consequence of not doing so.
    • Refer to a written request to borrow vacation time. A prior written agreement should be drafted in accordance with the term of the policy, and with an authorization to be reimbursed from employee’s paycheques; this agreement should be included in the employee file.”

    Paying Back the Accrual Loan

    Employees can pay back the negative leave in one of two ways. The employee and employer should agree upon the terms before ever taking the accrual loan.

    1. Allow the negative balance to become positive again in time, according to the accrual rate. If time accrues on a monthly or hours-worked basis, then the balance will slowly climb back into the positive. If the accrual rate is once yearly, then it will be positive again at the employee’s anniversary date.
    2. Deduct the leave from the employee’s paycheck. The above requirements would need to be previously agreed upon between the employer and employee. This is not the most common solution but it is an option. Deductions from paychecks can be unsettling so just make sure that this arrangement is agreed upon before letting the accruals go negative.

    If you keep track of accruals manually, then you will want to write down the number of hours “borrowed” at the time of the loan. Then at each paycheck, subtract the amount of accrual time earned in that period from the amount that was borrowed. You will do this until the balance owed is eliminated. At this time, the employee will start earning time off again.

    If employees have to pay the loan back from their paycheck, multiply the number of hours borrowed by the employee’s hourly rate. This is the amount of the loan. In this case, the employee should continue to accrue time-off as usual.

    Let the Software Do the Work

    An easier way to track negative leave, of course, is to use an automated accruals system. It’s easier and more accurate. Pieces of paper never get lost and important information is never forgotten. There is never any mistaking the number of hours taken or requested since all of that is documented on the employee’s timesheet.

    When employees make requests that bring their accrual balances into the negative, our system simply calculates that negative leave balance. Employees see how much they owe their accrual bank right from their own time sheets. They also see it as it becomes positive again.



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