Vacation Policy Is an Important Section of Every Good Employee Handbook

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Vacation policy seems to be one component of managing a business that is more driven by free enterprise competition than government regulation and oversight. In fact, the U. S. is one of the few industrialized nations that don’t regulate employee benefits at private companies.

Employers, however, should be aware that once they have a vacation (or any employment) policy in place, the government can act as an advocate for employees to make sure they receive the vacation time and pay to which they are entitled.

You can be that your vacation policy will also be high on the list of benefits potential employees want. They’ll expect to find it explicitly described in your employee handbook. Failing to do so can provide employees with an opportunity to claim your policy is applied unevenly or unfairly, and can be the basis of lawsuits.

There are a few steps you should take, as an employer, to be sure your vacation policy is comprehensive and well written and presented in your employee handbook and complies with your state’s labor laws for all parts of your vacation policy.

  1. Determine who is eligible for vacation time and pay, according to their employment status: executive, full-time, part-time, etc.
  2. Decide what method you’ll use for employees to accrue vacation time and pay. The two most common are length of service and pay period.
  3. State your unused vacation policy. Some companies will limit how much vacation time can be moved to the next year. Some states, however, don’t allow a limit. Employers can, however, limit of vacation time accrued in any period.
  4. Part of your unused vacation policy should also address terminated employees with accrued vacation time and pay. State laws also require that terminated employees are entitled to that time and pay and to receive it within a specific time period. Don’t even think of withholding vacation pay as a way to punish a terminated employee. The state could prosecute you or employees could file a civil suit.
  5. Discrimination is a no-no in virtually all employment situations, which also includes vacation policy. There are many Federal laws that could support employee claims of vacation discrimination.

Your vacation policy could also violate various types of employee leaves that Federal and state laws protect, such as voting, jury duty, military assignment, family or medical situations, etc. In many cases, employees are not required to use vacation time for legitimate leaves.

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