Q: My nanny did not use all of her vacation time last year. Does she lose it and start fresh in the new year, or does it carry over?

If you are a household employer in California (and you are if you paid your nanny more than $2800 in 2025), understanding vacation time for nannies is essential to staying compliant and maintaining a professional work relationship. And we get this question all the time” what happens when unused vacation days remain at the end of the year. Does your nanny lose that time, or does it carry over?

Let’s break down what the law says and what it means for you.

1) The Legal Answer in California

In California, once vacation time is earned, it is considered wages. That means vacation time for nannies cannot be forfeited. If your nanny has accrued paid vacation and has not used it, the time must carry over into the new year.

So-called “use it or lose it” policies are not allowed under California law. Employers cannot require an employee to use all earned vacation by a certain date or risk losing it. Once earned, those hours belong to the employee. That said, a family can set a cap on how much vacation time can accumulate (more on that below).

2) Why Vacation Is Treated Like Wages

California Labor Code treats earned vacation as deferred compensation. In simple terms, when your nanny accrues vacation time, she has already earned it through her work.

Because vacation time for nannies is legally considered earned wages, it cannot disappear at the end of a calendar year. This protects employees from losing compensation they have already earned.

3) What Employers Are Allowed to Do

Although you cannot implement a forfeiture policy, you are allowed to set a reasonable accrual cap on vacation time for nannies.

An accrual cap places a limit on how much unused vacation time can accumulate. For example, if you provide two weeks of paid vacation per year, you may set a cap at four weeks. Once your nanny’s vacation bank reaches that maximum, she temporarily stops accruing additional time. After she uses some vacation and drops below the cap, accrual resumes.

This is the lawful way to prevent unlimited accumulation while still respecting earned wages.

The keyword is reasonable. A cap should generally be set at a multiple of the annual accrual amount, commonly 1.75 times the yearly benefit.

4) What Happens at Termination

Another critical point about vacation time for nannies in California is what happens when employment ends.

Under California Labor Code Section 227.3, all accrued and unused vacation time must be paid out at the employee’s final rate of pay at termination. This applies regardless of whether the nanny resigns, is terminated, or the position ends for any reason.

Failure to pay out earned vacation can expose employers to penalties.

5) Best Practices for Families

To manage vacation time for nannies properly, consider these steps:

• Clearly outline your vacation policy in a written work agreement
• Specify how vacation accrues, such as per pay period or annually
• Include any reasonable accrual cap in writing
• Track accrued and used vacation carefully through payroll
• Communicate regularly about available balances

Clarity prevents misunderstandings and protects both parties.

It is also helpful to encourage your nanny to take a vacation regularly. Paid time off supports wellbeing and reduces burnout, which ultimately benefits your family.

6) When to Seek Legal Guidance

Employment law evolves, and household employment has unique considerations. If you are unsure whether your policies around vacation time for nannies comply with California law, consulting an attorney who specializes in employment or household employer law is a smart step.

For advice on whether your vacation policies are compliant, or to review and update your personnel policies, contact the Law Office of Lisa Pierson Weinberger at https://lawofficelpw.com/.

In California, vacation time for nannies does not reset at the end of the year. Once earned, it must carry over. You cannot legally require unused vacation to be forfeited, but you may implement a reasonable accrual cap to manage liability.

Taking the time to understand these rules ensures you are meeting your legal obligations while fostering a respectful and transparent employment relationship. Clear policies, accurate tracking, and open communication go a long way in building trust with your nanny and keeping your household compliant.