The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: Luke Warm on May 08, 2024, 07:49:08 AM
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I've got 200+ hours of vacation. The company typically buys the vacation from the employee when they quit. That's a lot of vacation to buy back in my case. Is it common to use the vacation then quit? Is that unreasonable? If I take the vacation then I still have health insurance for that 5 weeks. If not I need to get a policy started.
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I would ask to take the vacation and then your official exit date will be 5 weeks from now. Some companies handle vacation differently, it may say in your employee handbook. We allow employees to do either. We either pay them out lump sum or they use it and then officially leave once the vacation is exhausted.
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Thanks. So then would the lump sum include the amount I pay for insurance each payday?
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Financially, getting paid out for your vacation time and taking vacation time should work out the same. The difference is paycheck deductions and benefits - how much will "working" for 5 more weeks cost in terms of health insurance premiums and other deductions? How does this compare to the cost of losing these benefits earlier?
For me, it was (slightly) cheaper to start my ACA insurance sooner, rather than pay for another month or two of premiums with my company (because of subsidies). So I took my vacation time as a payout on my final paycheck. For you it might be cheaper to keep your current insurance a few more months.
My end-date was near the beginning of the month, and my employee-sponsored health insurance was good until the end of the month.
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Excellent. Thanks
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Thanks. So then would the lump sum include the amount I pay for insurance each payday?
The way our company does it, lump sum would not include insurance and you would lose insurance at the end of the month of the month in which you quit.
Example: if you quit 5/16 and chose lump sum payout, your health insurance would end on 5/31.
If you decided to stay employed, but just on vacation for 5 weeks your termination date would be 6/20 and your health benefits would end 6/30.
Each company is unique in how they handle it so you need to ask HR or read your handbook.
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One thing to be careful about (although it may not apply to OP's situation): When I quit my job at a big company, I quit in July and had used most of my yearly vacation time. However, the company actually clawed back a part of the vacation pay as it is apparently pro-rated for the year. In other words, they expect employees to take a proportional amount of vacation throughout the year. I paid up and was just glad to make my exit from that hellhole.
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What are you doing next? Are you taking a new job right away, or leaving the workforce for a while/indefinitely? If you're starting a new job right away the lump sum can give you some more money compared to if you take the vacation and push your start date out at the next place. On the other hand if you don't have any immediate plans to work elsewhere, using the vacation and then giving notice afterward can often be optimal. Especially when you have five weeks worth...you'll get an extra month or two of company-subsdized health care, you'll accrue some amount of additional vacation while you're on vacation, and there might even be a paid holiday or two in there. None of that happens if you just quit and have them give you a lump sum for your accrued vacation. The trade-off is that you have to pencil in a couple weeks in the office tying up loose ends during your notice period after you've already taken over a month away. You might prefer to just be done, take the lump sum, and get an earlier start on the next part of your life even if that choice leaves you slightly less wealthy.
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I don't have another job lined up. Just taking time off to figure out some options and do some house projects. I gave a year's notice. I'm too young to retire but thanks to MMM I can take a year off if I want.
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Highly recommend using as much as possible. You'll keep health insurance.
Vacation payout is taxed as a bonus (higher rate) so you'll lose money cashing out as well
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Vacation payout is taxed as a bonus (higher rate) so you'll lose money cashing out as well
Vacation/bonus pay is sometimes WITHELD at a higher rate. It is still taxed at your regular income rate (in the US).
The only way there would be a difference is if the time you are taking the vacation crosses years, then there could be a difference to spreading the pay over 2 tax years.
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I'm too young to retire but thanks to MMM I can take a year off if I want.
Enjoy the time off.
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It would be better to use it as vacation days. Spoiler! When using vacation days.....more vacation days are accruing!
Depending on your timeline I would work as much "taking a vacation" time into the picture as I can.
Some places let you take vacation for your last few weeks, and some won't let you take any - even pre-approved vacation during the notice. Since you also need the insurance, would be good for extending benefits too.
Any particular healthcare benefits you'd like to use? Like therapy - physical or psychological? that you could both enjoy the health insurance benefit and take the day off work to do it?
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I'd say use it. The company I was working for has the policy on the books that they are supposed to pay it out, but they have a track record of in fact NOT actually paying it out... My friend that quit the prior year from me didn't get paid out so I wasn't surprised when I also did not get paid for it... Also particularly nasty, they cut healthcare on the EXACT day of termination rather than going through the end of the month like normal companies.
So, checking the policy is good, but better ask others that have quit to see what REALLY happens.
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I'll check on when the insurance runs out. I think it's paid through the end of the month.
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My company states in their employee handbook that they will pay any unused PTO, but they will NOT pay for any unused sick leave. When I leave, which should be this year, I'm planning to use all the PTO and sick leave, so there is no chance of the company not following their own policy.
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DH quit at the beginning of a month to get a free month of benefits...and he used all of his vacation instead of getting paid for it.
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My company states in their employee handbook that they will pay any unused PTO, but they will NOT pay for any unused sick leave. When I leave, which should be this year, I'm planning to use all the PTO and sick leave, so there is no chance of the company not following their own policy.
Good idea. In my experience there are very few people who actually read those things, including folks who have to click approve on such things as PTO payouts. One of the most exhausting things to me is trying to get HR or finance to simply for their own policies.