Years of service: Overview, definition, and example
What are years of service?
Years of service refers to the total amount of time an employee has worked for a particular employer, typically measured from the start of employment until the current date or the date of resignation, retirement, or termination. It is often used to calculate employee benefits, such as vacation days, retirement contributions, severance pay, or pension eligibility. The concept is important for determining an employee’s tenure and the entitlements they receive based on the duration of their employment with an organization.
For example, if an employee starts working for a company in 2010 and the current year is 2025, their years of service would be 15 years.
Why are years of service important?
Years of service are important because they often determine an employee’s eligibility for certain benefits or rewards, such as retirement plans, bonuses, and promotions. Many companies use years of service as a factor in calculating employee loyalty and commitment, often offering recognition or financial rewards for reaching significant milestones, such as 5, 10, or 20 years of service.
Additionally, years of service are considered when calculating severance packages or the amount of paid time off an employee is entitled to. They are also important for employers to track in order to ensure compliance with labor laws or collective bargaining agreements that require certain benefits based on the length of employment.
Understanding years of service through an example
Let’s say an employee works at a company from January 1, 2015, to December 31, 2024. The employee’s total years of service with the company would be 10 years. As part of the company's benefits structure, employees with 10 years of service may be eligible for an additional week of vacation or a bonus.
In another example, a company offers a pension plan where employees who have worked for the company for at least 20 years are eligible for full retirement benefits. An employee who reaches 20 years of service would then be eligible to start receiving these benefits upon retirement.
An example of a years of service clause
Here’s how a years of service clause might appear in an employment contract or benefits policy:
“Employees are entitled to the following benefits based on their years of service: 0-5 years of service – 2 weeks of vacation; 6-10 years of service – 3 weeks of vacation; 11+ years of service – 4 weeks of vacation.”
Conclusion
Years of service is a key factor in determining an employee’s eligibility for various benefits, rewards, and recognition within an organization. It reflects an employee’s tenure and often plays a significant role in benefits packages, retirement plans, and other workplace entitlements. Tracking years of service helps employers reward long-term employees, maintain compliance with labor laws, and incentivize employee retention.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.