I work in payroll and we are given 80 hrs vacation and 40 hrs sick per year. I have many employees that miss a day work and because they have exceeded the number of hours they are required to work in the pay period they do not ever use their vac or personal time allotted them. The problem is at the end of the year an employee can only carry over 40 hrs from the previous year to the new year and I end up writing off anything over the 40.

Should they be entering the 8 hours on their timesheet as used instead of leaving this blank.

Yes, if they take off on Monday, they put 8 hours sick time on time sheet. So even if they still work 40 hours, they get paid for 48, using their sick day. The 8 hours sick time does not count toward over time, but they will get paid for it, if they use it.