How To Create A Vacation Policy For Your Employees

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Summary. A vacation policy covers how time off is handled in the workplace. It also covers how employees are expected to request time off. Depending on the policy, it can be more regimented, splitting the time into vacation days and sick days. Other businesses will have a more flexible policy, just letting employees take time off out of a pool of paid time off.

It’s best for vacation policies to be written down so that there’s no confusion over how the policy works and how to request time off. It will also often detail whether or not the vacation policy will improve the longer an employee stays with the company.

Key Takeaways:

A vacation policy explains how much paid time off employees have, how to request using it, and other leave requirements.
There are three different ways to organize a vacation policy: traditional, flexible, or unlimited.
While there’s no federal requirement to offer paid time off to employees, most employers will offer between ten and 14 days to their employees.

What Is a Vacation Policy?

Vacation policies are the guidelines that employees are expected to follow when taking time off from work. A policy of this sort will cover how many days employees will get off, during what timeframe they accrue, and how quickly, after being hired, workers can request vacation time.

Most companies will offer a certain number of days of vacation time per year – typically two weeks – but they may not all be available immediately. Some workplaces will require that employees be employed for a certain amount of time before getting access to their vacation time. Others will have it accrue over time as the worker spends hours at work.

Different Policy Types

Different businesses will have different ways of structuring and managing their vacation policies. This will be a matter of the industry that your business is in as well as company culture. Here are the three most common categories:

Traditional. A traditional policy would be the type most American workers are familiar with. Each person is given a certain number of days of paid sick time and paid vacation time and will make requests to use them as needed. Some will also include accrued PTO or personal days.

This system also rewards seniority. Those who are with the company longer typically will get more paid days off than those who’ve only been with the company for a short time. Usually, the shift starts five years in, then upgrades again ten years in. Of course, this can vary depending on the company and how desirable the particular employee is.
Flexible. This type of policy also has a set number of days you can take off but doesn’t break them up into vacation days, sick days, or personal days – it’s all just paid time off. A policy of this type can be more convenient for caregivers who may have to take time off to take care of sick children and don’t want to have to categorize it.

Due to it all being spun together, it can make keeping track of days off more complicated, especially if you still make use of the seniority system of offering more time off to long-term employees.
Unlimited. Unlike the previous two policies, this one doesn’t limit the number of paid days an employee can have off. The idea behind it is that so long as employees are getting their work done as needed – or have permission – there’s no need to track their time off. The policy is based on results rather than hours spent at work.

This type of policy is becoming popular in industries like technology that have to compete for workers. However, it’s unlikely to work well for hourly workers or those that require constant coverage, like servers, nurses, or line workers.

Writing Up Your Business’s Vacation Policy

It’s best to have a written vacation policy, as it prevents confusion, miscommunication, or other potential conflicts. Many businesses will put their vacation and time off policies in the employee handbook as a way to be sure that all employees receive the information and can reference it as needed.

As you’re creating the right policy for your business, here are some important things to keep in mind:

Legal requirements. While there isn’t a federal requirement to offer paid time off in the United States, there are state guidelines that are stricter, meaning that you should check your local laws before settling on a policy. The Family Medical Leave Act (FMLA) does require 12 weeks’ worth of leave, but it doesn’t have to be paid.

While there’s no legal requirement, it’s important to give employees paid time off. It helps with their job performance, loyalty to the company, and keeping them healthy.
What’s most important? Every business has different priorities. Are you looking to attract talent? Then more vacation days and fewer restrictions are a possibility. Do you want to accurately track time off? Then you should split it into different categories.
How to enforce the policy. This may seem silly, but some employees are reluctant to take time off. However, taking time off is important for employees’ health, productivity, and personal lives. Some employers will have time off expire at the end of the year, forcing their employees to use it or lose it. Others will offer encouragement or incentives.

On the flip side, if an employee is abusing their vacation policy by taking too much time off or failing to get their projects done or in shape to be handed over before leaving, then that’s a separate matter. Depending on the severity of the transgression, it can be something that requires a warning, probation, or even termination.
What your employees want. If you’re creating a vacation policy, it’s a good idea to get your employees’ input on what it should entail. Some employees may not have an opinion or may be unsure about how the different types of policies work, so you should consider that when asking for feedback.

Try to make sure that everyone understands the differences and that it’s all right if they don’t have a strong opinion either way. That’s likely to get you a much more accurate result of your employees’ feelings than otherwise.
Look into other policies. While copying another company’s policy directly may not work for your business, it’s never a bad idea to look at how others do things. It’ll give you an idea of how vacation policies are typically laid out, as well as potentially give you new ideas.

As you look over the policy, you should try to consider it from the employees’ point of view. What seems like a positive, and what seems unnecessary or even negative? What would appeal to you if you were starting at this company? What wouldn’t?
If one is even needed. It’s also possible to just offer unlimited, untracked vacation time. Instead, you’d just monitor other metrics, such as whether or not they get their projects done on time and are available to clients or their coworkers as needed.

Categorizations of Time Off

There are several different ways that time off from work is categorized. The different terms can seem puzzling, but they’re actually straightforward once you understand the concept behind them.

Sick leave. Many employers will offer a certain number of paid days to take off if an employee is ill. It can also be used if a family member is sick, such as a child, in order to take care of them.
Vacation. This is largely self-explanatory. Vacation leave is meant to be a time that is used if you aren’t sick. Most people use it to take a vacation or just to decompress at home.
PTO. PTO is short for paid time off. PTO is any time you take off that’s paid. That included sick days, vacation days, or anything in between. Some employers will just offer X amount of PTO rather than dividing it into sick days and vacation days.
Unpaid leave. There’s also unpaid leave. This is required to be provided by the FMLA, but some employers will offer additional unpaid – or partially paid – leave for other circumstances.

If an employee takes unpaid leave while they aren’t on the payroll anymore, it’s still expected that their job will be protected. Or, even if you can’t keep their exact job for them, you have to offer them something with equivalent responsibilities and pay when they return to work.

Creating a Vacation Policy FAQ

What’s the standard number of vacation days?

The standard number of vacation days in the United States is ten days to two weeks, usually increasing by a few days after the employee has worked there for five years or more. These will typically be separate from paid sick days.
Do employers have to pay out unused vacation time?

There’s no legal requirement that employers have to pay out unused vacation time. Whether you choose to do so or not will be up to your discretion. It’s possible to have a use it or lose it policy to encourage employees to use the time they have or to have vacation days roll over to the next year.
What’s the difference between PTO and vacation?

Paid time off, or PTO, refers to any time an employee is paid while having time away from work. That means it includes vacation time, sick time, personal days, and other types of paid leave. Some companies will lump it all together into PTO, while others will split it into different categories, such as vacation time and sick time.
Is it a requirement to offer vacation time?

No, there isn’t any federal requirement to offer vacation time in the United States. The majority of employers offer it as part of their benefits package as a way to attract talent and keep their employees in good health.

References

OPM – Annual Leave

Workplace Policies

Author

Di Doherty

Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.