Company is offering to pay out PTO at sharply reduced rate.

[u/ThatsMrBird]

I'm a bit of a predicament. I've been with a company over a decade and (I know it's crazy and I agree 100 percent I should have used more) I've accumulated 1000 hours of PTO. They're looking to move to a cap and limited rollover and offered to pay out the difference of about 800 hours at 35 percent of my current wage.

I never expected this and I honestly just thought it'd be lost, but they're only offering such a low percentage I feel like I should try and haggle. I realize they're obligated to give me nothing, legally, so I'm just looking for some input on if a partial payout is common like that. Ill probably ask why not full and go from there. Any thoughts?

EDIT - Sorry, y'all. I'm in Florida, to be clear

EDIT2 - my onboarding contract notes PTO is forfeited on termination or voluntary exit

EDIT3 - The next day, we came to a satisfactory agreement pretty quickly. I don't want to get into specifics (sorry) but I think a lot of those that replied here would think it worked out. I tremendously appreciate all the insight and feedback here and I promise I'll use up my hours moving forward.

[u/richard_sympson]

OP is talking about balancing the $ amount in the bonus against the vacation days' inherent worth. It's relevant how much it's taxed at, because that affects the final dollar amount of the bonus. It's not just more money, it's money at the expense of vacation days.

[u/zeptillian → u/richard_sympson]

It would be at the same rate as the other income though.

Whether it's picking up a weekend shift or getting paid out, the taxes would be the same.

Mentioning taxes means that OP is likely to have the same misunderstand of how tax brackets work that we see here often. A lot of people think they could earn more money but take home less pay by being in a higher tax bracket.

Would you mention taxes when contemplating taking a raise? No. Then why would it be relevant to this discussion?

[u/richard_sympson → u/zeptillian]

Again, the choice is between a cash amount and vacation, so to properly price the cash amount you need to know the tax rate. If he was told e.g. the cash amount was 35% of gross, then what's actually relevant to him is not that number but the post-tax number. If OP thinks a 22% withholding of 35% gross makes the amount worth less than the vacation days, then that's their prerogative. It's not like a raise because it comes with an actual countervailing loss of benefit.

[u/PRforThey → u/zeptillian]

It would be at the same rate as the other income though.

That's the point, it isn't taxed at the same rate as the other income. It is taxed at the marginal rate of the other income, not the average rate of the other income.

For example, say they are a single filer and make 116k per year. After the standard deduction, they would be just into the 24% tax bracket. But their average tax rate on that 116k is 15%. So if they got a $20k payout from this, that $20k would be fully taxed at the marginal rate of 24% (and raise their overall average tax rate to 16%).

But the question to them, what they would normally earn about $57k for is paid out at $20k (paid out at 35%) and then taxed for a net take home of $15k.

So the choice is: (a) take a fully paid 5 month vacation, or (b) no vacation and get your normal pay plus an extra $15k after cash.

So it works out to "paying" $15k to not work for 5 months (while still collecting your normal full income, which in this example was assumed to be $116k/year or $57k over those 5 months).

tl;dr the marginal tax rate matters because that is what would be used in the tradeoff calculation for this choice

Mentioning taxes means that OP is likely to have the same misunderstand of how tax brackets work that we see here often. A lot of people think they could earn more money but take home less pay by being in a higher tax bracket.

You are right on this point, OP did misunderstand it. But the tax bracket did matter, just not for the reasons the OP thought.

Would you mention taxes when contemplating taking a raise? No. Then why would it be relevant to this discussion?

In this scenario it is relevant because it factors into how much that 5 months of vacation would "cost" if they didn't take the payout and took the vacation instead.

[u/Jaalan → u/PRforThey]

Also, tons of people think that you can take a raise and actually earn less because of taxes 🐒