How Can Vacation Be So Confusing?

Giving employees paid time off for vacation seems to be a standard benefit at most companies.  In practice, it is one of the most confusing and variable policies among companies.  In my experience, it is a common employee issue and too often, employees do not fully understand the vacation “rules” in their own company.  It pays to be very specific regarding the company vacation policy.

The United States does not have a federal law covering paid vacation.  It is not a “right” but rather an employee benefit, and the employer gets to decide if it will give paid vacations at all, who is eligible, how much time to give, and other rules.

The vacation policy should be in your company’s Employee Handbook.  Some issues to consider:

  • Who is eligible for vacation?
  • How many vacation days will be given?
  • What is the accrual formula?
  • How many days may an employee take consecutively?
  • What is the prorate calculation for the first year of employment?
  • What is the procedure if more than one employee wants to take the same days off?
  • Will unused vacation be carried over to the next year, paid out or lost?
  • How is unused vacation treated upon termination of employment?

A detailed vacation policy in your Employee Handbook will give all employees a clear understanding of this important benefit.

Sample Policy


Vacation time off with pay is available to eligible full-time employees to provide opportunities for rest, relaxation, and personal pursuits.  Vacation time is earned and taken according to the following calendar year (January 1 – December 31) schedule:

Length of Service        Vacation Days            Director Level and Above

During the 1st Full Year             5 days                                   10 days

During the 2nd Full Year        10 days                                   15 days

During the 3rd Full Year          10 days                                   15 days

During the 4th Full Year          15 days                                   15 days

During the first year of employment (from your date of hire until December 31 of that year), you will earn a prorated vacation benefit, based on the month you were hired.  For example, if you are entitled to 10 days and you are hired on July 1, you will be entitled to 5 days vacation in your first year of employment (10 x 6/12 = 5 days).  For vacation calculation purposes, if your first day of work is on or before the 15th day of the month, we will count that month towards vacation entitlement.

Employees will be eligible to take vacation time after 6 months from their date of hire.  Therefore, if you are not able to take vacation during your first year of employment, then you will be allowed to carry it over into the next calendar year.  Thereafter, there is no carryover allowed from year to year.

To take vacation, employees must request written approval from their supervisor at least two (2) weeks in advance.  Requests will be reviewed based on a number of factors, including business needs and staffing requirements.  Employees are encouraged to take vacation time in one-week increments with a maximum of one week at a time.

Vacation time is paid at the employee’s base pay rate at the time of vacation.  It does not include overtime or any special forms of compensation such as commissions.

Vacations do not accrue from year to year (except as stated above).  In the event that available vacation earned during a calendar year is not used, it will be forfeited.  You many not receive pay in lieu of any vacation time not taken.

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