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Home : Essentials of Payroll : Use Honor System to Track Vacation and Sick Time
Use Honor System to Track Vacation and Sick TimeUse Honor System to Track Vacation and Sick TimeIt is common for the payroll staff to be in charge of tracking the vacation and sick time used by employees. This involves sending out forms for employees to fill out whenever they take time off, usually requiring their supervisor's signature. Upon receipt, the payroll staff logs the used time in the payroll system and files the forms in the employee personnel folders. If the payroll staff does not account for this information correctly in the payroll system, employees will probably spot the problem on their remittance advices the next time they are paid and will go to the payroll office to look into the matter. These inquiries take up accounting staff time, as does the paperwork-tracking effort. When used with some control features, it is possible to completely eliminate the tracking of vacation and sick time by the payroll staff. In this scenario, employees are placed on the honor system of tracking their own vacation and sick time. Though this system keeps the payroll staff from having to do any tracking of this information, there is also a strong possibility that some employees will abuse the situation and take extra time. There are two ways to avoid this problem. One is to institute a companywide policy that automatically wipes out all earned vacation and sick time at the end of each calendar year, which has the advantage of limiting the amount of vacation and sick time to which an employee can claim that he or she is entitled. This step mitigates a company's losses if a dishonest employee leaves the company and claims payment for many hours of vacation and sick time that may go back for years. The other way to avoid the problem is to switch the tracking role to employee supervisors. These people are in the best position to see when employees are taking time off and can track their time off much more easily than can the payroll staff. In short, with some relatively minor control changes, it is possible to use an honor system to track employee vacation and sick time.
A common best practice is to merge different tracking systems for personal leave days, vacation days, and sick days into an enlarged number of vacation days, thereby reducing the number of tracking systems from three to one. However, this can meet with considerable resistance by employees, who feel that the company is trying to take away some of their time off. A good way to prevent this from happening is to grant an increased number of hours of vacation carryover time into the next year, at least for the first year or two of the transition, so that employees have an adequate time frame in which to use up excess leave days. This is seen as a particular benefit in companies that did not previously allow a carryover of unused sick time or personal leave days, but which will now roll into the vacation category, where the time may be carried forward.
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