The Job Doc Blog

Calculation of vacation payout

Q: My son just left a job where he was paid on a salary basis. He had been at the job for about six years and was owed for 13 vacation days. Upon his leaving, the company figured his "daily rate" by dividing his salary by 365 days. Is this typical of how a business would determine a vacation day rate of pay for a salaried employee, even though he worked a five-day work week? They ended up paying him about $600 less than what he would have been paid had they divided his weekly pay by five days.

A: Your instincts are good. You are right to question the five-day work week vs. the 365 days in a calendar calculation.

I consulted Valerie Samuels, Esq., Partner at Posternak, Blankstein and Lund. Her response: “Your son has been cheated.” Samuels explains: “The Fair Labor Standards Act (FLSA) is a federal law which governs certain wage and hour issues. We need to know your son’s regular schedule to calculate his vacation pay rate. The FLSA regulations provide that if an employee is employed solely on a weekly salary basis, the regular hourly rate of pay is computed by dividing the salary by the number of hours which the salary is intended to compensate. In the absence of a regular work schedule, a 40-hour workweek is the standard. This may also be calculated as a per diem rate based on a five day work week. Based upon a 40-hour workweek, your son would be entitled to vacation pay based upon his weekly salary divided by 40-hours.” Samuels and I both agree that using 365 days to calculate his vacation time is absurd.

Samuels offers, “The good news is that your son has an effective remedy at his disposal. Massachusetts General Law Chapter 149, Section 148 provides that vacation pay is equivalent to wages and must be paid immediately upon termination if the employee is terminated or in the next regular payroll if he leaves voluntarily. In the absence of such payment, your son is entitled to mandatory treble damages plus attorneys’ fees and costs. It is irrelevant whether your son’s former employer made an honest mistake or was ignorant of the law. Your son should contact the Massachusetts Attorney General’s office or seek the advice of an employment attorney to make sure that his former employer promptly pays the balance of his vacation pay.”

In Massachusetts, employers are well-advised to pay close attention to these laws so as not to be caught up in a potentially expensive situation. Additionally, employees should educate themselves so they know their rights and make certain they are paid correctly for their work.

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