Using Vacation Policy as Sick Leave

The Pros and Cons of categorizing your employees’ Vacation Policy as Sick Leave.


The Oregon Sick leave law allows employers to use an alternative type of leave policy in lieu of a sick leave policy. The leave law states that if you have a different leave policy that is at least as generous as the sick leave law requirements, then the alternate policy may be substituted. Many employers have been rolling sick leave and vacation leave into one lump of “time” called a Paid Time Off policy or “PTO”. A PTO policy makes things simple—one policy that can be used for anything.


A likely pitfall is that some vacation policies require advanced scheduling of time off.
A PTO or vacation policy must allow the use of unscheduled PTO or vacation time.


If you already have a vacation policy in place, you might be tempted to do roll your sick leave into a single pool of just “vacation” time. And there is a financial incentive to do so–through a weird quirk of Oregon law, workers’ compensation is paid on sick and PTO leave, but not on vacation time. While the Oregon sick leave law will allow you to make this change, your workers’ compensation insurer will take a dim view of this strategy. The law will require you to have written sick leave policies to comply with the Oregon sick leave law. Those policies must state that employees can take off time when they are sick. That part of the policy will render all of the “vacation time” into PTO time for workers’ compensation premium purposes. If your employees are clerical, then the difference would be negligible. If your employees are roofers, the difference in price would be significant.


For some employers, their best strategy is to have a bucket of sick leave hours that complies with the new law AND a separate pool of vacation time. If employees have sick time they are more likely to use it and not come to work sick and share their illnesses with coworkers. An additional benefit of having two pools of leave, is that sick days are generally not fully utilized as employees want to save them for when they are sick. It is likely that of the required 40 hours of sick leave, employees will use an average of 16-24 hours per year.


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