... Termination Vacation Pay

A state employee who separates from state employment is entitled to be paid in a lump sum for the accrued balance of the employee's vacation time as of the date of separation if the employee has accrued six months of continuous state employment sometime during the employee's life.

"Continuous state employment" means employment with the state that is not interrupted by a period when the employee is not being paid a regular state salary. The period when an employee is on leave without pay is not an interruption. However, the time an employee is on leave without pay does not count toward fulfilling the six-month requirement if the period covers one or more entire calendar months.

Eligible employees who remain employed in a non-benefit eligible position may receive a lump sum vacation payment.

In addition, an employee terminating state employment may, with the agreement of the employing agency, be allowed to remain on the payroll after the last day worked to utilize vacation leave in lieu of being paid in a lump sum. Employees who exercise this option will not accrue any additional vacation leave while remaining on the payroll to utilize their vacation leave.

Lump sum payments for accrued vacation time are computed as though the employee actually worked that time for the agency. This means that the vacation time is projected forward from the termination date. The employee must be paid for each holiday encountered during the projected-forward period in proportion to the number of hours they would normally work (FTE).

Longevity and hazardous duty pay are not included in a lump-sum payment for accrued vacation time. Longevity and hazardous duty are paid only if an employee elects to remain on the payroll to exhaust vacation time rather than accept a lump-sum settlement.

Computation [State Comptroller Payroll Requirements and Restrictions]: When leave balances are sufficient to pay for an entire month, no computation is necessary and the employee receives one month's salary for the month. The beginning leave balance is then adjusted by the number of official work days/hours in the month less any holidays falling on an official workday. The remainder of the accrued vacation balance is carried forward and applied in the same manner until fully exhausted.

If payment involves a partial month (either the first month or the last month in the application of accrued hours), computation of an hourly rate must be done and multiplied against the hours in the partial month. The hourly rate for a partial month is calculated by dividing the monthly salary by the actual number of work hours for the partial month (without subtracting holidays). This rate may be different than the employee's regular hourly rate.

A lump-sum payment for accrued vacation is wages for both federal income tax and social security withholding purposes. However, the payment is not subject to deductions for employee retirement contributions to the Optional Retirement Program, the Teacher Retirement System or the Employee's Retirement System of Texas.

In the case of death the estate of an employee who has an accrued vacation balance after six (6) months of continuous employment will be paid for all of the employee's accumulated vacation leave.

In addition, one-half of their accrued sick leave balance, or 336 hours, (whichever is less) will be paid to their estate.

Departments will be notified and asked to verify final vacation accrual balances when employees' terminate and personnel actions are completed.

The University of Texas Health Science Center at Houston
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Last updated August 29, 2008