Donating accrued vacation and sick time

Q         Are employees allowed to donate their accrued vacation and sick hours to another employee? If so, what would be the proper procedure?

A   Yes, employees can donate their accrued vacation and sick hours to coworkers. Consider implementing a leave-sharing program to make sure all procedures are followed correctly, everything is properly documented, and tax consequences are mitigated. Setting out the guidelines allows for unbiased and fair application of leave donation.

The leave-sharing program should specifically state who can donate their time, the procedures for applying for and approving leave time, and how it can be used. For example, some leave-sharing programs require employees to have a certain number of unused leave hours before being allowed to donate. This protects them from giving up too much time they may need to use in an emergency. Additionally, some employers may not allow employees to receive donated sick time if the accident or illness is compensable under worker's compensation benefits or if it occurred during the commission of a crime or other wrongful act.

The leave-sharing program should also take tax issues into consideration. Because the income is taxed to the person who earned it, the donor would be taxed on the pay, not the recipient. The IRS, however, permits employers to circumvent this issue through two exceptions: for medical emergencies and major disasters.