How to Create A Restorative Vacation Policy for Your Employees

Ah, there’s nothing like kicking back and relaxing on the beach. Or maybe your thing is hiking a remote mountain trail and swimming in the spring run-off. Perhaps you’ve always wanted to explore Rome and eat gelato in the sunshine. Whatever your passion is, we all love taking a vacation and experiencing the world with those we love. 

To get to take the trip of your dreams, you need to be able to take a few days off work. That requires a vacation policy, so everyone is clear on how time off works. That way everyone can have a break now and again. 

Discover all the ins and outs of vacation policies and how they work as part of employee benefits.  Dive into some suggestions to get you started creating your own programs. 

What Is a Vacation Policy?

Picture yourself lying on the beach beneath the sun. Or maybe hiking through a mountain pass and swimming in lakes. Whatever it looks like for you, vacation feels pretty nice. On top of that, it’s also an important time to disconnect from your obligations and relax. In order to take this time, though, you’ll need official vacation time from your job. 

As an HR professional, one of your responsibilities is to establish a vacation policy to make this process simple. A vacation policy outlines the requirements for employees to request time off for any reason. It also explains how many days of paid time off employees get.  Paid vacation lets an individual get their paycheck, even though they never stepped foot in the office or signed in online. Discover some tips for creating a well-balanced policy that’s clear for everyone involved. 

The Importance of Having a Vacation Policy for Your Employees

 Having a clear time-off policy can provide your team with some great perks: 

Promotes great work-life wellness and self-care across your organization

Simply put, employees need time off. Sixty-three percent of employees experience burnout that hurts their engagement — and ultimately retention.. This is why employers have vacation policies: to encourage their employees to take needed vacations . Employees after time away are often more productive. Vacation helps take care of employee wellness and promotes self-care. Having benefits like a time-off policy can also be very strategic in attracting and retaining talent. 

Eliminates confusion

Hypothetically, an employee decides to take a vacation. They inform their desk-mate and direct supervisor they’ll be out of the office for a certain amount of time. However, while they’re gone, the manager needs their input on a project and can’t find them anywhere. Nobody told the manager. That can get messy. 

A policy is there to eliminate that confusion and help avoid scheduling problems. Having a good standard for vacation time and paid time off (PTO) helps everyone know what to expect. Another key component of reducing confusion is communicating best practices for vacation time. You might suggest employees regularly check their PTO allowances, confirm them with a leader, and enter them into the proper system. 

Prevents a loss in productivity when employees are gone

An employee is a valuable part of your company, and the work they do is important. When they’re on vacation, what happens? There’s obviously a gaping hole where they operate. Luckily, a vacation policy can help make that more manageable by giving teams advance notice to prepare. Having a clear benefits strategy can help in shaping this official policy.

Components of a Vacation Policy

The exact pieces of your own program can vary, depending on your needs. However, here are three suggestions of components to include: 

Paid Vacation Time

Paid vacation time is when you get to leave work for a vacation and still get your usual pay. Seventy-one percent of workers in the industry get paid vacation time. People expect it, so it is a great benefit to attract talent to your company. 

Paid Holidays

On top of PTO,  consider including details for paid holidays. While you’re not legally obligated to give paid holidays, 81% of private industry workers have access to them. In fact, 98% of management, business, and financial industry employees get these days off from work. Providing these perks can help your people want to stay. Many companies choose federal holidays such as: 

• New Year’s Day
• Martin Luther King Jr. Day
• President’s Day
• Memorial Day
• Juneteenth National Independence Day
• Independence Day
• Labor Day
• Indigenous Peoples’ Day (Columbus Day)
• Veterans Day
• Thanksgiving Day
• Christmas Day 

Your vacation policy would detail which of these kinds of holidays your employees get off. 

Paid Sick Leave

Paid sick is when you give your team an allotted amount of days where they get to stay home and recover without losing money. There are 17 states with paid sick leave laws, so if you leave in one of these states, you’ll have legal requirements to consider. Even if it’s not a legal obligation, it’s a great benefit to consider offering. Your vacation policy could give details on how to call in sick and how many days employees get. 

The Different Types of Vacation Policies, Explained

There’s no one-size-fits-all vacation policy. Each approach comes with pros and cons, and the right choice will be whichever meets your team’s needs best. Consider these two programs as just a couple of ways to craft your own time-off plan: 

Unlimited Vacation Policy

An unlimited vacation policy allows individuals to take off as much time as they want, provided they complete all work. This innovative type of policy focuses on output, rather than hours spent at the desk or online. 

Advantages

• Flexibility and Autonomy. Employees get to manage their own time off. That gives them the flexibility to choose what works for them. It also shows the employer trusts them.  On top of that, individuals don’t have to ration their allotted days and can take time whenever it’s needed, which can lower stress.
• Attracts Talent. This flexibility can be a significant draw for new talent. Current employees also consider it to be something that encourages them to stay. For example, employees at the company Dropbox rank their unlimited PTO as their fourth most-valued benefit. It also helps Dropbox stand out as a great employer! 
• Reduces Administrative Burden. Your HR department will need to spend less time tracking vacation days with unlimited PTO. This policy shifts the effort of managing vacation to employees, reducing administrative overhead.

Challenges

• Potential for Overuse. Some employees might misuse this policy, leaving their coworkers to pick up the slack. Consider educating workers on how to utilize this policy well. Then if a policy abuse does occur, you might sit down with that individual to discuss how to fairly take vacation time. 
• Workload Management. It can be challenging to manage responsibilities, especially during popular vacation periods. This is hard for customer-facing companies that need full coverage. Consider communicating with team members about which times are crucial for enough people to work. 
• Pressure to Perform. Unlimited policies don’t protect certain days for vacation. Sometimes, employees may feel pressured to avoid taking leave to demonstrate commitment. Potentially that could lead to burnout. You might find ways to encourage individuals to take their time off by communicating the benefits and having leadership take vacations.

Accrued Vacation Policy

An accrued vacation policy lets employees earn time off based on their length of service. Typically, the longer an individual has been with a company, the more vacation time they have. This policy is a common and straightforward choice. 

Advantages

• Clear Structure. It’s easy for team members to know exactly how much time they have for vacation. There’s no uncertainty for you or the employees. 
• Rewards Longevity. This policy can incentivize longer tenure because vacation benefits improve over time. For example, after the first year, employees might get ten days while employees in their eighth year might receive fifteen days. 
• Easier to Manage. When time off is predictable, managers can plan for absences. That can help leaders ensure coverage and balance workloads. 

Challenges

• Accrual Caps and Rollovers. Depending on the policy, you might need to manage leftover days moving into a new year. You also have to determine how to enforce accrual caps. For example, if you have a limit of 80 hours during a period, the employee will need to take time off before accruing more. Consider creating a standard policy and communicating it to employees to reduce confusion. 
• Delayed Benefits. New employees might have to wait before accruing a meaningful amount of vacation time. That can make the first months frustrating for those looking to take a holiday. You might offer new workers a certain number of hours off and then let them begin accumulating more. 
• Administrative Tracking. Typically, vacation time has to be put into an official system. Managing that system requires tracking, which can add to the administrative burden. Consider investing in a system that automates as many tasks as possible. 

How to Create a Vacation Time Policy (Step-by-Step) 

Having an effective policy in place helps you maximize the upsides of offering vacation time. Consider these steps for crafting your own for your organization: 

Step 1: Research and Compliance

Begin by looking into the legal requirements for vacation and paid time off (PTO) in your jurisdiction. This includes understanding any mandatory vacation accrual and payout rules. After that, consider common practices within your industry to ensure your policy is competitive and attractive to potential employees.

Step 2: Define Objectives

Determine what you want to achieve with your vacation policy. Goals may include improving employee wellness or increasing productivity. 

Step 3: Policy Details

Spend some time deciding the following: 

• Accrual vs. Lump Sum: Determine whether employees will collect vacation time throughout the year (accrual) or receive it all at once at beginning of each year or employment period (lump sum).
• Eligibility: Specify which employees are eligible for vacation time based on factors like employment status (full-time, part-time) or tenure.
• Accrual Rate: If using an accrual system, define how vacation time is earned (e.g., hours per pay period).
• Maximum Accumulation: Set a cap on how much vacation time employees can carry over to the next year to encourage regular use of time off.

Step 4: Usage Guidelines

In order for employees to use this benefit, you will need to decide: 

• Request Procedure: Outline the process for requesting vacation time, including notice period, method of request, and any blackout dates.
• Approval Process: Describe how vacation requests will be approved and what criteria will be used (e.g., seniority or first-come-first-served).
• Carryover and Expiry: Clearly define rules around how unused time will work, such as whether it expires at the end of the calendar year or if it rolls over.

Step 5: Communication

After you write up all of this information, you’re ready to document it in your employee handbook or staff intranet. This lets all employees have direct access to your company’s vacation rules. You’re then ready to announce the organization’s new policy. First, you might email the policy or send it across chats your team members use regularly. After that, consider holding informational sessions or Q&A meetings for clarification.

Step 6: Implementation and Enforcement

To help your new vacation policy have maximum effect, ensure that all managers understand the vacation policy and how to apply it fairly and consistently. It’s a good idea to check in from time to time to see how guidelines are being implemented and that employees are using this benefit.

Step 7: Evaluation and Adjustment

Consider periodically collecting feedback from workers and managers about the vacation policy and its impact. Employee surveys can be a great way to collect the opinions your staffers have about your vacation policy. Taking the time to review the policy annually and make necessary adjustments helps it continue to meet the needs of both the company and its people.

Bolstering Employee Wellness with a Vacation Policy

Overall, a vacation policy is an opportunity to communicate with your employees about how they can take advantage of the benefits you offer them. This will allow them to take the time they need to relax and strive toward a more balanced wellbeing. 

Vacation time is a vital component of wellbeing, but it's just one piece of the puzzle. 

By implementing a comprehensive wellbeing program, your organization can create a structured yet flexible framework for a variety of benefits. These programs go beyond mere time off. It can encompass aspects like mental health support or physical wellness activities. On top of that, your organization will likely see a return on investment for the resources you put into developing these programs. In fact, 95% of companies tracking program ROI see positive wellness returns.

Talk to a wellbeing specialist to learn more about creating great benefits for your organization!

You May Also Like:

• Return on Wellbeing 2024
• What is Flexible Time Off, And How Does It Work?
• FTO vs. PTO: What’s the Difference?
• What Is a Floating Holiday and Why Do Companies Offer Them?
• What You Should Know About Unlimited PTO
• Which States Require Payout of Unused Vacation?

References 

• Blakely-Gray, R. (2022, October 17). Use the Average Vacation Time to Build Your Business’s Policy. Retrieved December 19, 2023 from https://www.patriotsoftware.com/blog/payroll/looking-average-vacation-time-determine-businesss-policy/.  
• Blakely-Gray, R. (2023, November 27). Paid Sick Leave Laws by State: The Chart, Map, & Accrual Info You Need. Retrieved December 19, 2023 from https://www.patriotsoftware.com/blog/payroll/state-mandated-paid-sick-leave-laws/.  
• Brower, T. (2022, July 24). Burnout Is A Worldwide Problem: 5 Ways Work Must Change. Forbes. Retrieved December 19, 2023 from https://www.forbes.com/sites/tracybrower/2022/07/24/burnout-is-a-worldwide-problem-5-ways-work-must-change/?sh=2dcf39646c1e.  
• Carvahlo, C. (2023, October 3). Why Work-Life Wellness Can Save The Workforce As We Know It. Retrieved December 19, 2023 from https://blog.gympass.com/en/why-work-life-wellness-can-save-the-workforce/.  
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• Gympass. (2023, October 30). Employee Benefits Guide. Retrieved December 19, 2023 from https://blog.gympass.com/en/employee-benefits-guide/. 
• Indeed. (n.d.). Vacation Policies for Your Business (With 2 Templates). Retrieved December 19, 2023 from https://www.indeed.com/hire/c/info/vacation-policies#:~:text=Find%20jobs.-,What%20is%20a%20vacation%20policy%3F,paid%20time%20off%20of%20work.  
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