Vacation Policy Guide for HR

Jan 11, 2023

By Jessica Miller-Merrell

Every employee needs a vacation now and then, whether it’s a two-week trip to the Bahamas or a single day off for mental health. It’s incredibly important for organizations to have a consistent vacation policy spelled out in their handbooks so their employees can have some well-deserved rest. But what exactly is vacation time in the workplace? Should it be paid? How does it accrue? And what’s the difference between a vacation and other forms of leave?

Vacation Time Basics

Vacations are usually reserved for full-time employees to take time off from work for a reason other than illness. Employees don’t have to work during the time they take off, and they still get paid the same amount they would have made if they had worked that day.

Because federal law doesn’t require an employer to provide any amount of vacation pay, companies handle their vacation policy handbooks in different ways. But just because vacation time isn’t required doesn’t mean companies shouldn’t provide it. Because most full-time employees expect to have some paid time off, organizations that fail to offer it can struggle to attract and retain talent.

How to Assemble the Perfect Vacation Policy

In order to create the best vacation policy, an organization must balance what’s best for the company with what’s best for the employees. Here are a few factors to take into consideration.

Sick time versus vacation time. Some companies put sick time and vacation time into one category, giving employees just one bulk number of days to be used for both purposes. Other companies separate sick time and vacation time, and employees can pull days out of one pool or the other, depending on the reason for the time off.

Bulk vacation time versus accrued vacation time. Some employers give employees a bulk amount of vacation time that’s based on how long they’ve worked there. Alternatively, in some organizations employees accrue their vacation hours over set increments of time, such as a certain number of hours every pay period or a certain number of days every year.

Unused vacation days. It’s common for a company to reset its employees’ vacation time at the beginning of each new year. However, some organizations will let their employees roll over their vacation days to the following year and even pay them for their unused days in their final paycheck.

Vacation Policy Examples

Here are a few examples of the types of wording that can appear in vacation policies:

  • All full-time employees at [company] are eligible for our paid vacation plan.
  • Vacation time can be used for any personal matters aside from sick time, which is included separately in our paid-time-off policy.
  • Employees will accrue vacation time starting on their first day and will accrue [number of hours] every [length of pay period].
  • Accrued hours cannot be carried over into the next year.
  • At [company] we offer employees who have been full-time members of the staff for 1 to 5 years 25 business days of paid time off per year to be used at their discretion. This pool of days can be used for both sick time and vacation time.
  • We operate our paid time off on a rollover policy, which means unused days can be rolled over into the next year.

A Winning Strategy

Each company’s vacation policy will vary from company to company, depending on organizational needs and employee preferences. No matter what the specifics are, though, vacation policies serve a valuable function as HR tools that not only make expectations and regulations clear, but also aid in recruitment and retention efforts.

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