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Texas Payroll/Personnel Resource

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Lump-Sum Payment of Accrued Vacation Time
Examples of Computation of Lump-Sum Payment of Accrued Vacation Time

Example 1:

  • Annual Applicable Rate of Compensation: $28,488.00
  • Monthly Applicable Rate of Compensation: $2,374.00
  • Effective Date of Termination: Close of business on June 30, 2009
  • Employee Type: Full time (40 hours/week)
  • Vacation Time Balance: 336 hours
  • Workdays/Working Hours: July – 23 workdays (184 working hours); August – 21 workdays (168 working hours)

1. Because the employee’s vacation time balance is sufficient to pay for the entire month of July, no computation of a dollar amount is necessary for that month. The employee receives an entire month’s salary for that month ($2,374.00).

2. The number of working hours in July is subtracted from the employee’s beginning vacation time balance. Eight hours is not added to that balance as the July 4th national holiday falls on a weekend.

  • Original vacation time balance: 336 hours
  • Plus: N/A
  • Less: Number of working hours in July – 184 hours
  • Equals: Balance to carry forward to August – 152 hours

3. August involves payment for a partial month because the number of vacation time hours carried forward to August is less than the number of working hours in August. Therefore, compute an hourly rate of pay to multiply against the vacation time balance carried forward from July.

  • Monthly applicable rate of compensation: $2,374.00
  • Divided by: 168 working hours
  • Equals: $14.13095/hour

4. The agency must add eight hours to the employee’s vacation time balance for each holiday that occurs during the period the balance is allocated over, but only if the holiday occurs in August and on a workday. The holiday is included in this calculation.

5. The amount paid to the employee for vacation time allocated in August 2009 is:

$14.13095/hour x 160 hours = $2,260.95

6. Total gross lump sum:

July: $2,374.00
August: $2,260.95
Total gross: $4634.95

Example 2:

  • Annual Applicable Rate of Compensation: $17,532.00
  • Monthly Applicable Rate of Compensation: $ 1,461.00
  • Effective Date of Termination: Close of business on May 26, 2009
  • Employee Type: Full time (40 hours/week)
  • Vacation Time Balance: 116 hours
  • Workdays/Working Hours: May – 20 workdays and one holiday (168 working hours); June – 22 workdays (176 working hours)

1. The employee is entitled to be paid for the Memorial Day holiday that occurs on May 25, 2009, and will receive payment for that holiday on their final regular paycheck. Therefore, the holiday does not affect the calculation of the lump-sum payment.

2. The employee’s vacation time balance is allocated over three workdays in May. Therefore, compute an hourly rate of pay for May to multiply against the vacation time balance allocated to May:

  • Monthly applicable rate of compensation: $1,461.00
  • Divided by: 168 working hours
  • Equals: $8.69643/hour

3. The amount paid to the employee for vacation time allocated in May 2009 is:

$8.69643/hour x 24 hours = $208.71

4. The number of working hours in May used to compute the amount of the vacation time payment for May is subtracted from the employee’s beginning vacation time balance.

  • Original vacation time balance: 116 hours
  • Less: Number of working hours in May – 24 hours
  • Equals: Balance to carry forward to June – 92 hours

5. June involves payment for a partial month because the number of vacation time hours carried forward to June is less than the number of working hours in June. Therefore, compute an hourly rate of pay to multiply against the vacation time balance carried forward from May.

  • Monthly applicable rate of compensation: $1,461.00
  • Divided by: 176 working hours
  • Equals: $ 8.30114/hour

6. The agency must add eight hours to the employee’s vacation time balance for each holiday that occurs during the period the balance is allocated over, but only if the holiday occurs in June and on a workday. There is one holiday in June 2009, which falls after the allocation period and therefore is not added to the employee’s time. The vacation hours to be allocated in June 2009 = 92.

7. The amount paid to the employee for vacation time allocated in June 2009 is:

$8.30114/hour x 92 hours = $763.70

8. Total gross lump sum:

  • May: $208.71
  • June: $763.70
  • Total gross: $972.41

Source

Texas Government Code, Sections 661.061-661.067, 661.091-661.094.