How do employers account for salary differences in donated leave programs?

A donated leave or leave-sharing program allows employees to donate paid leave into a reserve for employees who have exhausted their leave to use in the event of an emergency. Program guidelines and eligibility requirements are at the employer’s discretion.

One of the biggest challenges employers face in administering donated leave programs is wage equity. Inevitably, the employer will encounter a recipient employee at a different rate of pay than the donor employee. The employer may handle this situation in one of two ways.

One method is to account for salary differences in comparable dollar values—wage basis. The dollar value is converted into equivalent leave hours for the employee receiving leave. For example, employee A has an hourly rate of $30. Employee A donates two hours of leave totaling $60. Employee B experiences an emergency, is eligible to participate in the program, and requests three hours of leave at a rate of $15 per hour. Employee B then exhausts the dollar value of $45 (three hours of leave), and a total value of $15 of employee A’s donation remains in the emergency leave bank.

A second method is the hour-for-hour basis, where the leave is paid at the receiving employee’s wage rate. Under this method, the employer should consider the possibility of higher paid employees using leave donated at a lower rate of pay and how the employer will fund that discrepancy.