Vacation policies are intended to be used for the specific purpose of vacation or leisure time, and churches who offer vacation time generally offer sick leave as well. The alternative to having two separate benefits is a singular Paid Time Off (PTO) benefit, which may be used for any purpose the employee chooses.

Some states consider vacation and PTO (but not sick leave) to be accrued wages. Consequently, those states require payout of unused vacation and PTO at termination and have rules limiting use-it-or-lose-it policies. For example, an employee who resigns with three sick days and three vacation days would only have to be paid for the three vacation days. If the same employee resigned with six days of PTO remaining, they would need to be paid for all six.

If you are in a state, county, or city that requires churches to offer paid sick leave and you decide to offer a PTO plan instead, it is critical that you ensure the plan meets all the requirements of the mandatory sick leave law or ordinance. These requirements usually include letting employees use their time in small increments (e.g. one or two hours), ensuring that they accrue PTO fast enough, and allowing carry over into a new year. If you’re in one of these areas, you’ll definitely want to take a close look at the law or ordinance to ensure your PTO program is compliant.

Regardless of which benefits you choose to offer, you’ll want to make sure they are clearly articulated in writing and that all employees are made aware of what is available and how the policy or policies operate.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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