TN 8 (11-93)
RS 01401.370 Vacation Pay and Pay in Lieu of Vacation
1. Vacation Pay
Vacation pay is the amount the employer pays to an employee during the course of the employment relationship for the period of time the employee is away from work.
2. Pay in Lieu of Vacation
Pay in lieu of vacation is additional compensation to the employee for unused vacation.
Both vacation pay and pay in lieu of vacation are wages for computation purposes in the period they are actually paid.
NOTE: Vacation payments made from union-administered funds, such as the International Ladies Garment Workers' Union (ILGWU) Health and Welfare Fund, are wages. Although the employer is responsible for reporting the vacation payments for SSA purposes, the employer may authorize an agent (such as the union) to do so, but only with IRS approval.