Organizational Wellness

Creating the Right Vacation Policy for Your Employees

Aug 24, 2023
Last Updated May 15, 2024

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. Or perhaps you’ve always wanted to explore Rome and eat gelato in the sunshine. Whatever your passion is, we all love taking a vacation, exploring the world, and having new experiences with the people we love. 

But to get to take the vacation of your dreams, you need to be able to take a few days off work. And to take time off work, you have to have a vacation policy in place, so everyone is clear on how vacation time works, and so everyone can have a break now and again. 

Let’s dive right into the nitty gritty of vacation policies, so you can implement a great one for your workplace and help everyone take the vacation of their dreams. 


What Is a Vacation Policy?

To start, what is a vacation policy? A vacation policy outlines the requirements for employees to request time off for their vacations. It also explains how many days employees get of paid time off (where the paycheck doesn’t drop even though you never stepped foot in the office or signed in online). For a vacation policy to be effective, the guidelines need to be clear and easy for everyone to understand. 

The Importance of Having a Vacation Policy for Your Employees

Having clear guidelines about anything is generally a good idea, but let’s look at the more specific benefits of having a vacation policy for your employees. 

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

Simply put, employees need time off. Sixty-three percent of employees experience burnout. Burnout diminishes employee engagement, job satisfaction, and employee retention. Basically, if employees don’t get breaks, the company suffers. Yeah, that’s no good. Which is why employers have vacation policies to encourage their employees to take some time off now and again to avoid employee burnout. Employees after time off are often more productive, innovative, relaxed, engaged, and balanced. Having benefits like a vacation policy, can also be very strategic

Eliminates confusion

Let’s say an employee decides to take a vacation. They tell their desk-mate they’re going and their direct supervisor. But while they’re gone, the manager needs their input on a project and can’t find them anywhere or why they’re gone. Yeah, that’s a mess. Vacation policies are there to help eliminate confusion and keep employees and employers from getting into messes with vacation time. 

Having a good standard for vacation time and paid time off (PTO) helps everyone know what’s going on. Part of making use of a vacation policy is regularly reminding employees about best practices with taking time off to eliminate confusion. That includes having them regularly check their PTO allowances, confirming it with a leader, and entering it 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. So when they’re on vacation, what’s next? There’s obviously a gaping hole where they operate, but luckily, a vacation policy can help make that more manageable. With an official policy in place, managers will know when their employees are going to be out of the office well in advance, so they can prepare to offset the missing employee. 

Basically, a vacation policy makes it easy to ensure you get advance notice for when employees are going to be gone, and then you can adequately prepare to avoid losing productivity and efficiency. 

Components of a Vacation Policy

Vacation policies do make things easier, don’t they? But what’s included in a vacation policy? What days does the policy actually cover? Here are the main components of a vacation policy: 

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, so it is a great benefit to include for your employees to attract talent to your company. 

Paid Holidays

PTO is the obvious thing for a vacation policy, but a vacation policy should also include 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 paid holidays. So it’s pretty likely that you will at least consider offering some employees paid holidays. 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 employees an allotted amount of days where they get paid to stay home and recover while they’re sick. 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 when crafting this part of your vacation policy. Your vacation policy would give details on how to call in sick, how many days employees get, and where to formally enter any information. Paid sick leave is also something to consider when you’re creating your employee benefits because it’s a great benefit. 

Building Your Vacation Policy

So now you know what time could be included in a vacation policy. Let’s look at how to build your vacation policy to get started communicating all your vacation policies. 

Start with the Averages

How many days of paid vacation time should employees get? Well, that’s up to you, ultimately. But a good place to start is to follow the averages. The average for an employee who’s new at the business is 10 PTO days, with increases for every 5–10 years at the company (not a bad idea to inspire company loyalty and retention, right?). 

Don’t forget that averages may vary by industry. But that being said, offering too little time off might be normal in some industries that are intent on the “old way of working,” but that doesn’t necessarily mean you want to go along with that. Vacation time is part of work-life wellness, and not having much could leave you struggling to find talent and keep employees. Maybe you want a set amount of vacation time, or maybe you want an unlimited vacation policy. Remember it’s up to you in the end. 

Describe How Vacation Time Is Accrued

Once you’ve got your basics set up, your accrued vacation policy should outline and fully explain how employees get vacation time. It might be that they gain more vacation time by staying with the company. However it looks, make sure employees have a clear understanding of how they can get more PTO. 

Outline Procedures for Taking Vacation Time

Employees need to know how to go about taking vacation time. A vacation policy should be where they can turn to get answers on vacation time and all things PTO. A good policy could include: 

  • Who to alert about vacation time
  • What system to enter vacation time into
  • How long in advance vacation time needs to be reported

A vacation policy is all about clearing these kinds of things up and saving everyone some hassle down the road. 

The Bottom Line

Overall, a vacation policy is really just an opportunity to communicate with your employees about how they can take advantage of the benefits you offer them, so they can take care of themselves and strive toward wellbeing. Vacation time isn’t the only benefit that can help your employees with balance and taking care of themselves. Talk to a Wellbeing Specialist to learn more about creating great benefits for your company.

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Wellhub Editorial Team

The Wellhub Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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