Accumulating paid absences may be vesting or non-vesting. If accumulating paid absences are vesting, the employee is entitled, upon termination of employment, to cash settlement for unused leave. If accumulating paid absences are non-vesting, the employee has no entitlement to cash settlement of unused leave. For example, an employment contract may provide for cumulative annual leave of 20 days, vesting to a maximum of 30 days, and non-vesting cumulative sick leave of 10 days per annum. After 2 years of service, the employee would have been entitled to take 40 days of annual leave and 20 days of sick leave.
But if the employee resigned after 2 years of employment, during which no annual leave or sick leave had been taken, the termination settlement would include payment for 30 days unused annual leave (the maximum allowed by the employment agreement). There would be no cash settlement of the unused sick leave because it was non-vesting. Vesting and non vesting sick leave is shortly described in below:
To discuss about vesting and non vesting sick leave , I would first say about vesting sick leave. If sick leave is vesting, the employee is entitled to cash settlement for unused leave. If sick leave is non-vesting, the employee has no entitlement to cash settlement of unused leave.
The employer recognizes a liability for accumulating sick leave, measured as the un-discounted amount expected to be paid. The entity will have good reason to expect that all vested accumulating sick leave will be paid.
Liability recognition for vesting and non vesting sick leave :
However, if sick leave is not vesting, a liability is recognized for proportion of accumulated sick leave that the entity expects to be taken by its employees.
No liability or provision is created for non-vesting sick leave as the type of sick leave taken by the employee indicates that no additional liability will give rise for non-vesting sick leave.