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Layoffs: Vacation and Bonus Pay

Source: EDD Vacation Pay GuidelinesBonuses

Fixed Layoff: Vacation pay is considered wages (counts against Unemployment claim)

A fixed layoff with a specific recall date normally will not break the employment relationship, and no termination of employment occurs.  Vacation payments resulting from a fixed layoff, whether in accordance with a collective bargaining agreement, employer policy, or at the claimant's request, will constitute wages under Section 1279.

Indefinite or Conditional Return to Work Date: Vacation pay is not considered wages (does not count against Unemployment claim)

On occasion, an employer may lay off employees and advise them at the time of the layoff to report to the company on a specified date to see if there is work to be performed. This is not a guarantee of work. The employer has not given the employees a definite date on which to return to work therefore, the layoff is considered to be for an indefinite period. Any vacation pay which is paid during such a period of layoff is not wages for unemployment insurance purposes.

Additionally, payments to an individual for vacation pay which was earned but not paid for services performed prior to termination of employment, shall not be construed to be wages or compensation for personal services.

Bonuses are wages earned prior to termination (does not count against Unemployment insurance claim)

Bonuses are earned prior to the time of the termination and thus are allocated back to the period before termination.

Procedure for Bonus Pay

You want to be sure not to classify this bonus as "severance pay".  Severance pay is meant to hold a person over during a period of unemployment and would count against their claim.  A bonus could be in the form of a separate check dated prior to the date of termination, and issued separate from payroll.

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