Vested, non-vested—what’s the difference? 

It’s got nothing to do with a sleeveless, close-fitting garment. Although we hear the term “vesting” all the time, we might not know exactly what it means. 

Essentially, vesting is the process of accumulating benefits over time. In the workplace, this usually applies to retirement benefits, but can also refer to other types of benefits, like health insurance or paid leave.

If you work at a company with a vesting policy for sick leave, it’s a very important distinction. For those in certain positions, vesting can mean the difference between a nice chunk o’ change and nothing at all. Here’s what you need to know about vested sick leave.

What is Vested Sick Leave?

If sick leave is vesting, the employer has to pay their employees for any unused sick leave time after they have left the company. This is opposed to unvested sick leave, which means the employee does not have to be paid for unused time.

What is the Difference Between Vesting and Non-Vesting Sick Leave?

Non-vesting sick leave is when the employee has to forfeit any unused sick leave time when they leave the company. In most cases, unvested sick leave must be used within a certain timeframe or it will be forfeited. On the other hand, vesting sick leave does not have a time limit and can be carried over from year to year.

How Does Sick Leave Vesting Work?

Typically, companies will have a vesting schedule that outlines how many days of sick leave you earn each year. For example, you might earn one day per month. 

Vesting days are normally capped at a certain number (such as 60 or 90 days), so employees can’t accrue unlimited days over time. 

Companies offering vested sick leave normally have a policy stating that all accrued, unused sick leave is payable to the employee at the time of separation.

Why is Vested Sick Leave Important?

Vested sick leave belongs to the employee, not the company. That means that it can’t be taken away without just cause. Vested sick leave is not subject to a “use-it-or-lose-it” rule, so employees can’t forfeit unused sick leave. This gives the employee a valuable safety net in case of illness or injury.

Why Might an Organization Provide Vested Sick Leave?

Employers might offer vested sick leave as a benefit to their employees. Vested sick leave is considered more valuable than regular sick leave, as it cannot be taken away from the employee. Typically, there is no incentive to not use unvested sick leave, as it will be forfeited if not used within a year. 

There are a few reasons why an organization might choose to provide vested sick leave:

• Attract and retain talented employees: Offering this type of benefit can show employees that the organization values them and wants to do what it can to help them stay healthy. 
• Reduce the number of absences taken by employees: Employees who know that their sick leave is protected will be less likely to take time off for illness. This can lead to a more productive workforce.
• Provide financial security for employees: If an employee is unable to work for longer than the standard number of sick days provided by law,  they will still have a cushion of sick leave to fall back on. This can help them avoid losing income if they are unable to work.

How is Vested Sick Leave Different From Other Types of Leave?

Vested sick leave is a type of paid leave that allows employees to accrue a certain number of days or hours off work each year, which they can use for illness or injury. This type of leave is different from other types of sick leave, such as unpaid leave or family and medical leave, because employees have a right to the days or hours they accrue. This means that upon termination, the employee is entitled to receive a payout for unused vested sick days. 

Example of a Vested Sick Leave Clause

Let’s take a look at this sample clause found in Nurse Betty’s sick leave policy:

VESTED SICK LEAVE. Regular full-time nurses shall accumulate four (4) hours of sick leave each month, and regular part-time nurses a pro-rata portion thereof based on hours compensated, that shall be credited to the vested portion of sick leave payable at the regular rate of pay on the first day of a bona fide illness, injury, or disability due to pregnancy. Nurses shall be required to notify the Employer two (2) hours in advance of the commencement of the employee’s scheduled shift if unable to report to work. Failure to do so may result in loss of paid sick leave for that day. There shall be no discipline for legitimate use of sick leave. Abuse of sick leave shall be grounds for discipline.

Source: Law Insider

The above clause spells out the following important details:

• Vesting schedule:  Employees will accumulate four hours of sick leave each month, credited to their vested portion of sick leave
• Payout: Sick leave is payable at the regular rate of pay on the first day of a bona fide illness, injury, or disability
• Notice: Employees must give two hours’ notice before their shift if they are unable to work
• Abuse: Abuse of sick leave is grounds for discipline

Make sure to understand the particulars of your sick leave policy. We don’t want you or Nurse Betty getting into any trouble at work.

Final Notes

While employers are not required to offer vested sick leave, it can be a valuable benefit for employees. If you are lucky enough to have this type of leave available to you, be sure to read the terms and conditions carefully. This will ensure that you understand your rights if you need to take time off for illness or injury. 

As an employer, tracking sick leave can be a challenge. Make sure you have a system in place to keep track of days accrued and used. Doing so will help you avoid any confusion down the road.

Elizabeth