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Texas Payroll/Personnel Resource

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Lump-Sum Payment of Accrued Vacation Time
Remaining on Payroll, Payroll Detail, Appropriation Year, Withholding

Agreement to Remain on the Payroll

A payment of accrued vacation time to a state employee must be made in a lump-sum, unless the employee is remaining on the payroll to exhaust that time.

A state agency and a state employee may mutually agree for the employee to remain on the agency’s payroll to exhaust that time instead of receiving the lump-sum payment. The employee may not use sick leave or accrue sick leave or vacation time while remaining on the payroll.

Payroll Detail

The payroll detail submitted with a payroll voucher to make a lump-sum payment for accrued vacation time to a state employee must include the:

  • Employee’s rate of pay on the effective date of separation from state employment.
  • Effective date of separation from state employment.
    – and –
  • Number of days and hours of accrued vacation time, not including hours for authorized national and state holidays.

Appropriation Year Determination

A state agency must charge a lump-sum payment of accrued vacation time to an appropriation that may be used to pay compensation.

The payment must be charged to the appropriation year the employee’s separation from state employment becomes effective in.

Tax and Retirement Withholding From Payments

A lump-sum payment of accrued vacation time is subject to federal income tax withholding and withholding under the Federal Insurance Contributions Act (FICA). The lump-sum payment is not subject to deductions for:

  • Employee retirement contributions to the optional retirement program or the Teacher Retirement System of Texas.
    – or –
  • Employee contributions to ERS.

Source

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