What is Negative Leave, and How Does It Work?

Managing leave is challenging enough when everyone sticks within the boundaries of your leave policy.

But what about negative leave? Sometimes your employees might ask for time off that drops their balance into the negative, and it’s important you know how to handle this.

Keep reading and we’ll explain all you need to know about negative leave.

What Does a Negative Leave Balance Mean?

Negative leave is when an employee’s leave balance drops below zero.

This could be intentional or unintentional. Sometimes, it’s a mistake, such as a technical issue when adjusting an employee’s leave balance, or failing to prevent them from requesting leave they don’t have available.

More often, it’s part of your leave policy – allowing employees to request time off when they don’t have the days in their current balance.

What Happens if a Leave Balance Becomes Negative?

If someone drops into a negative leave balance, they’re effectively “borrowing” leave from the future.

Since it’s a loan, they need to pay that loan back.

As they accrue more PTO, their balance will increase and eventually go back into the positive.

However, if they leave the job before their balance gets back to 0, they will likely have to repay any outstanding negative balance, which is typically taken from their final paycheck.

Do Employers Have to Allow Negative Leave?

There’s no requirement for employers to allow negative leave.

In areas that mandate a certain amount of paid leave for employees, when that balance hits zero, the employee has no entitlement to take any more leave.

It’s totally up to each company to decide how to handle this – and there are pros and cons either way, as we’ll explain next.

Pros and Cons of Negative Leave

There are some good reasons to allow negative leave in your company, as well as a few reasons not to.

Here are the pros and cons, to help you understand which way to go with your company’s PTO policy.

Pros

• It’s great for employees, allowing them the flexibility to take time off when they need it.
• The employee-friendly approach can help increase your recruiting pull, and decrease employee turnover.
• It may reduce absenteeism (aka unapproved absences), if employees know they can dip into negative leave if they need to.
• It can help keep employees happy and healthy, with a positive work-life balance, which benefits productivity and company culture.

Cons

• Negative leave requires more work to manage, to ensure employees pay their balance back.
• Some laws prevent companies from deducting money from an employee’s paycheck, so you may end up losing money if someone leaves their job with a negative balance.
• Allowing more time off may result in lower productivity.

Should You Allow Negative Leave?

In most cases, allowing employees to take negative leave is a good thing.

Things come up in peoples’ lives, such as unforeseen circumstances, emergencies, or short-notice commitments, and as a company, you want to make every effort to accommodate employees during these times.

Increased flexibility helps employees feel better about their work, helps them keep their work and personal lives in balance, and they typically respond by giving more back to the job, and producing at a higher level.

It’s often fairly straightforward to manage, and the positive impact of allowing employees to take an extra one or two days (which they’ll soon earn back anyway) is usually more substantial than the risk it comes with.

Final Thoughts: Making Negative Leave Work For You

If you do allow negative leave, you need to put some thought into managing it, so it doesn’t just become a free-for-all.

First, you’ll probably want to set a limit. Otherwise, employees could go massively into “debt” with their leave balance, which could take years to pay off.

It’s best practice to limit it to around 10, or even lower if you’re concerned about the risk.

Make sure you clearly spell out this limit in your PTO policy, and make it easy for employees to see how much negative leave they’re allowed to take.

You’ll also want to document how negative leave will be reimbursed. You might want to consider allowing employees the option of financially reimbursing the borrowed amount as well.

If your state/national laws don’t allow you to deduct money from employees’ paychecks, then you may not want to allow negative leave – or if you do, set it at a very low limit, to avoid employees from taking a large negative balance just before they quit, at a cost to the business.

Finally, ensure your leave management system is equipped to handle negative leave, so you don’t lose track of who has to pay off their balance.