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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6 thoughts on “Using Vacation Policy as Sick Leave

  • Mona Lyche

    I am still confused. If a company gives 40 hours of vacation time and rolls this over to paid time off. Does this mean that if an employee uses 16 hours for vacation they only have 24 hours for sick time left?

    • Cardinal Services Post author

      Many employers that had vacation policies converted them to a Paid Time Off (PTO) plan in 2016. If you used 16 hours as vacation during that benefit year leaving you with 24 hours to use in 2016, they can convert that time to PTO leave for the remainder of the benefit year (usually your employment anniversary date).

  • Pat Probst

    Are the 40 hours of sick leave deducted from the employee’s already earned vacation leave time. Or is the employee granted whatever he needs, up to 40 hours for sick time and still get all of his vacation leave time?

  • Boyd Ray

    My employer deducts our vacation pay from us in order to cover our sick leave pay. I think this is unfair because we, the employee, are actually paying for our own sick leave. The company is just giving us permission to be sick. It is coming out of our earned vacation hours. I think this is unfair. In effect we have no sick leave.

    • Cardinal Services Post author

      The Oregon Sick Leave Law requires employers to provide sick leave and gives them the flexibility in complying with this new mandate. Converting vacation time to a paid leave is acceptable under the law.