Tips on Setting Up a Vacation Policy

Vacation time can positively impact both your employees and your business. Your employees benefit because they get some needed time off to relax and recharge their batteries. Your business wins because it can serve as an effective recruiting tool, boost morale and lead to increased long-term productivity. But how exactly do you go about setting up a vacation policy?


Determining Eligibility

Your first priority is to decide which employees will be eligible for vacation time. Will it only be available to full-time employees who work a minimum of 35 hours per week, or will it also be available to part-time employees who work as little as 20 hours per week?


Choosing the Number of Days

This is a biggie. When deciding how many days to offer each year, you’ll need to come up with a number that’s fair for your employees but won’t put your business in a difficult position because you’ve got inadequate manpower. In other words, you’ll want to find a happy medium.

To give you an idea of how much paid vacation time is right for your business, it’s helpful to see how many days other businesses are offering. Information from a national study on Sure Payroll provides a breakdown.

  • Less than 10 days: (45.7 percent of respondents)
  • 10 days: (30 percent of respondents)
  • 15 days: (16.9 percent of respondents)
  • More than 15 days: (7.5 percent of respondents)

As you can see, over three quarters of employers offer 10 days or less. Keep this in mind when choosing the number of vacation days to offer your employees.


Use It or Lose It?

Another major decision to make is whether or not you’ll allow unused vacation days to roll over into the next year or if you’ll have a “use it or lose it” policy where unused vacation days are automatically forfeited. If you want to keep things as simple as possible, a use it or lose it policy is probably the way to go because you won’t have to keep track of unused vacation days.

Employees are also more likely to take advantage of their vacation time if you implement this policy, which can be beneficial for their health and well-being. According to The Atlantic, “84 percent of workers use all of their vacation time under a use it or lose it policy, and only 48 percent use all of it when it can be rolled over.”


Handling Vacation Requests

There’s one final but important matter to consider — how you’ll handle your employees’ vacation requests. Without the right policy in place, you could be left scrambling to cover the workload. Here are some specific things to consider:

  • How far in advance employees will be required to put in a request (e.g. two weeks or one month in advance)
  • Prioritizing requests (e.g. first come first serve)
  • The platform employees will use to put in their requests (e.g. email or a software program)

By addressing these areas, you should be able to set up an effective vacation policy for your business. Ideally, it will be aligned to meet the needs of your employees while keeping operations running seamlessly.


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