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Summer is Here: Should Your Small Business Have a Vacation Policy

Posted by Darryl V. Pratt | Jun 27, 2019 | 0 Comments

There is no legal requirement for businesses to offer paid  or unpaid vacation time to employees, but it is common knowledge (and common  sense) that employees who occasionally take time off are more productive and  engaged when they return to work. If you decide to offer vacation time to your  employees, a well-drafted vacation policy will help to ensure that it works  well for both your small business and your employees. Here are some important  tips to consider.

● Consider offering paid vacation time. Although offering paid vacation time will be an expense  for your business, it is likely to be a benefit over the long term. Employees who are able to take a break tend to come back  refreshed and rejuvenated--and ready to work productively for your company. In  addition, it is a benefit that will help your business attract and retain  stellar employees. According to the Bureau of Labor Statistics, three-quarters of workers had access to paid vacations in 2018, so  offering this benefit will help your business compete with others seeking the  same well-qualified employees.

Note: There is no legal requirement for employers to offer paid  or unpaid vacation (though some states require paid family, parental, or sick  leave for certain employees), but when paid  vacation is offered, some states have applicable statutes regulating, for  example, whether an employer can establish a “use-it-or-lose-it” policy or  whether an employer must provide compensation for unused accrued vacation time  upon the termination of employment. Check with a well-qualified business law  attorney to make sure your policy complies with applicable legal requirements.

● Make sure your policy is clear. If you offer paid vacation time (or paid time off, which  includes vacation time, personal days, and sick days), make sure your  employees understand how it works. Some businesses offer a fixed number of  vacation days per year that roll over if they are unused, and others provide a  specific number of days that are forfeited if the employee fails to use them  (although, as mentioned above, a few states prohibit this policy). Additionally,  there are a number of states that require employers to pay employees for  unused paid vacation time. Include a clear  explanation of your vacation policy in your employee handbook and require your  employees to sign a statement that they have read the policy. This will help  prevent disputes that could lead to  litigation.

● Require notice in advance. Many employees want to take a vacation in the summertime,  and for small businesses with only a few employees, this can create a problem  if several of them request time off during the same period. While you can  still be flexible about when your employees take their vacation, requiring  notice gives you the opportunity to plan for those absences by arranging for and training other  employees or temporary workers to cover their essential duties.

● Consider a “rota” system. Karen Dillon, in an article for the Harvard Business  Review, suggests creating a rotating list of employees and allowing the  employees at the top of the list to choose their vacation days first. The next  year, those employees move to the bottom of the list, and other employees move  to the top so that all employees eventually have their first choice of  vacation days. This suggestion is especially helpful for small businesses that  are unable to function when multiple employees are away at the same time or  those that have difficulty finding temporary employees to fill in.

Give Us a Call

If you are considering  offering vacation time to your employees, we can help you draft a clear,  well-thought-out vacation policy that will accomplish your goals and comply  with the law, as well as provide answers to any other benefit-related  questions you may have. Please call us today at (972) 712-1515 to set up a  meeting.

About the Author

Darryl V. Pratt

With over twenty (20) of experience as a dual-licensed Attorney and Certified Public Accountant, Darryl V. Pratt has practiced law in all areas of corporate and business law, non-profit law, estate planning, probate, guardianship, asset protection planning, bankruptcy (Chapters 7, 13 and 11), real estate, and taxation.

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