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Vacation Policies for Your Business (With Downloadable Templates)

Ample paid vacation time is an essential benefit for your employees. It helps to promote a great work-life balance and self-care among your employees. To manage work productivity while your employees are enjoying their time off, you need a clear vacation policy to define the procedures and limitations of vacation time. Learn more about vacation policies, discover why they’re important and review vacation policy templates to help you build a customized policy for your company.

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What is a vacation policy?

Vacation policies are guidelines provided by employers that outline the requirements for using vacation time. It details important aspects of vacation time, including requirements for requesting time off and how many days employees are given for paid time off of work. An effective accrued vacation policy is easy to understand, and each employee must have the same guidelines and regulations listed in their policies. 

Importance of having a vacation policy in place

Having a set policy in place helps you clearly communicate the requirements for employees to follow when requesting time off for vacation. This eliminates confusion for both the employee and employer. It helps the employee understand how many days off they’re given and how far in advance they need to request their time off from work. 

Supervisors also don’t have to worry about productivity being lost, as the policy typically outlines details about the arrangements employees must make for their time off. These arrangements can include locating another employee to temporarily handle their tasks or providing instructions on how to complete certain job duties while they’re gone. The policy might also limit how many people can take vacation time at the same time to avoid having too many people gone at once.

Related: How to Calculate Vacation Pay for Your Employees

Overview of a vacation policy

Companies aren’t required to offer vacation time to their employees, though it’s an effective employee benefit that candidates look for in an ideal workplace. If you do offer this perk, you’ll need a clear vacation accrual policy with the following information. Always review state and federal labor laws to ensure your vacation policy complies with those regulations. A labor attorney can review your policy to ensure it’s compliant.

Vacation time eligibility

When building your vacation policy, specify who is eligible. For instance, you might decide that full-time and part-time employees are eligible, while contract employees and interns aren’t. You might require that employees work a certain number of days before receiving vacation time and other benefits, also known as a probationary period. List all vacation time eligibility requirements so employees are clear regarding if and when they’ll get this perk.

Earning vacation time

Once you’ve explained which employees receive vacation time, your employee handbook vacation policy should explain how they’ll earn it. Accruing vacation hours over time is a common policy. For instance, employees may earn five hours of vacation time each pay period. Other companies provide their employees with all their vacation time once a year. Your policy must include which day they’ll receive this full amount, such as on their start date or at the beginning of the year.

If team members earn vacation time differently based on their position, include those details. For instance, your full-time employees might earn more vacation time each pay period than your part-time employees since they don’t work the same number of hours. 

Employees might also earn more vacation time the longer they stay with your company. You might offer 10 days of vacation for the first five years of employment before bumping it up to 15 days of vacation. At year 10, you might increase it to 20 days. Decide on these milestones and include them in your policy. 

Rolling over vacation time

Outline what happens with vacation time if employees don’t use it by the end of the year. You might let staff members roll over some or all of their vacation time to the next year. Detail your decision in the policy so employees can plan for using their time off before they lose it. 

Payout upon leaving

Another issue to cover in your policy is what happens to unused time when an employee leaves the company. This can depend on state regulations—some states require that employers pay out all unused vacation time. If your state doesn’t require this, you’ll need to decide how to handle the unused vacation time when someone leaves. 

Vacation time request process

Define what procedures employees must follow when requesting vacation time. Examples include how far in advance they need to submit the request, how many days they can take at once, how many people from the department can be gone at once and any restricted times, such as seasonal busy periods. If you limit how many people can be gone at once, explain who gets priority, such as whoever requests it first or on a seniority basis. Include step-by-step procedures for taking time off so employees know what to do when they’re planning vacation time.

Related: Unlimited Vacation Policy: Why Employers Should Consider It

Vacation policy sample templates

Having vacation policy examples can make it easier to create your policies. You can customize the wording to fit your guidelines for using vacation time. Use these vacation policy templates to help you build your company policy: 

Accrual over time policy example

“Creative Marketing Solutions offers a paid vacation plan, which is part of the benefits package provided to [full-time, part-time or any other team members qualified for vacation time] team members to give employees the opportunity to maintain a healthy work-life balance. This policy can be used for [vacation, personal matters, volunteerism, health and wellness or all of these options]. 

An employee accrues vacation time on their first day of employment. This means their full vacation year starts on their first day of employment and ends on the day before the anniversary of their first day. The employee will accrue an additional [number of hours you’ll allow them to accrue] every [number of pay periods, weeks or months they’ll accrue the number of hours allotted]. 

The number of vacation hours you accrue is determined based on your accrual rate. When you run out of hours accrued, you’re still eligible to take time off, but it’ll count as an unpaid leave of absence. You won’t receive any pay for this time off. Your accrual time [can or can’t] be carried over each year. When you request time off, please notify your supervisor at least [number of weeks in advance they must notify supervisor] in advance. Work with them to plan accordingly for your upcoming time off from work.”

Annual accrual policy example 

“At Associated Strategy International, we offer [number of vacation hours offered to employees] each year. Employees can put these hours toward [vacation, personal matters, volunteerism, health and wellness or all of these options]. We allow [full-time, part-time or any other team members qualified for vacation time] employees to take this amount of time off when needed. 

Every employee’s vacation year starts at the beginning of the calendar year and ends on the last day of the calendar year. All employees receive their full vacation time at the start of the year. When you run out of vacation days, speak with your supervisor to determine if you’re still eligible to take time off and receive no pay for those days away from work. Any additional time you haven’t used [can or can’t] be carried over at the start of each year. 

We only allow employees to take off [number of days or weeks] at a time for their vacation. If you’d like to take off more, meet with your supervisor to determine if additional arrangements can be made accordingly.”

Frequently asked questions about vacation policies

What is a typical vacation policy?

The typical vacation policy for employees working at a company for 1-5 years is 10 business days of paid time off. Some companies let employees who work with them for an extended amount of time earn additional days of paid vacation the longer they stay with the organization. Most employees who work at a company for 5-10 years earn around 15 days of vacation each year. Those who work 10-20 years typically get 17 days off.

What is the difference between PTO and vacation?

PTO and vacation time are similar but often have slight differences. Paid time off refers to any time an employee is paid for their time away from work. This can include sick leave, vacation time or any other personal time away from work. Vacation is usually a type of paid time off when employees take days off for reasons other than being sick. Some companies offer separate paid time off allowances for sickness and vacation. Others lump vacation and sick time into one category and provide a set amount of hours for both.

What does it mean to accrue vacation?

Accruing vacation time means earning hours for each pay period you work that can go toward your vacation time instead of getting the time off all at once. Establishing set vacation policies allows your employees to better understand how much time they’re given and how to take time off. Talk with your employees to learn what aspects they prefer and get feedback on ways to improve the policy so it meets everyone’s needs.

 

Further reading


Vacation Policies for Your Business Templates for PDF & Word

Download these templates to help you write a clear vacation policy that outlines everything your employees need to know.

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*Indeed provides these examples as a courtesy to users of this site. Please note that we are not your HR or legal adviser, and none of these documents reflect current labor or employment regulations.


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