How to Create an HR Vacation Policy for Employees

A company’s vacation policy is essential to craft because it forms a fairly attractive part of an employment offer. It can be a key part of an organization’s retention strategy, highlighting how competitive your company’s benefits are and prioritizing employees’ mental health. Creating an HR vacation policy for employees relies on what your organization is willing or able to provide. Ultimately, it should be in line with similar companies in your market or business category.

Discover the steps on how to create an HR vacation policy for employees.

What information to put in a vacation policy

A vacation policy is an in-depth look at staff requirements when requesting time off from work. A vacation policy should include how many vacation days an employee receives per pay period, how the accrual process works, and how soon an employee can request vacation time.

Minimum three weeks of vacation

Nearly 3 in 4 companies offer a minimum of three weeks vacation annually to new employees. As you create an HR vacation policy, you may want to offer this three weeks minimum or consider increasing that amount.

Executive-level employees have more vacation time

For high-competition executive-level positions, every 3 in 4 employees tend to provide a minimum of four weeks of vacation to new executives. As an HR consultant, this is something to consider if you are preparing a policy for a wide range of employee levels.

Increase vacation time with seniority

Nearly all organizations offer increasing vacation time with length of service. This encourages retention and rewards employees who have been with your company for extended periods.

Define how vacation time is assigned

An HR vacation policy should define how vacation time is assigned. Companies typically do it one of two ways. They either provide it as a block of time at the end of a year of service or on a pro-rated basis each month or pay period. A pro-rated basis is often preferable for hourly, part-time, seasonal, or casual employees.

How to calculate vacation pay

Most businesses calculate vacation time/pay based on the national Canadian standard of 4% of an employee’s gross pay.

Carrying over limited amounts of unused vacation

Every 9 in 10 companies allow employees to carry over a limited unused vacation time from one year to the next. It is important to cap this amount as not capping it can increase an employer’s financial liability and run the risk of having too many people away at once.

Arrange vacations far in advance

Encourage employees to arrange their vacation schedules as far in advance as possible, especially in smaller companies where covering for absences could become an issue. Though you want to prioritize employee’s needs, it’s also important that the needs of the business are met so that productivity is maintained. Ask employees to submit their vacation plans by a certain date in your HR policy.

Make unavailable dates clear in your policy

If there are days or times of year when your business cannot afford to offer vacation time, make these dates clear in your policy. For example, your front-line employees must be active and at their desks during a busy season.

Provide a reason for denied vacation

If an employee requests a vacation, do everything possible to avoid denying it. This can upset an employee. For this reason, policy rules should be made extremely clear. If a request is denied, explain why and devise a reasonable solution that keeps the employee happy.

Allow employees to have input

To keep them supportive of the policy, you may want to allow employees to decide when and how they use their vacation time. Certain employees may want to cluster their days together, while others may prefer to space their paid time off as they accrue it.

Employees can give up vacation time

Most companies allow employees to give up their vacation time and will not force them to take it. However, if an employee is permitted to give up their vacation time, they still have the right to vacation pay, which must be issued accordingly.

Make sure employees have the vacation policy

Ensure that after it is written or updated, employees have the vacation policy accessible to them at any time. A company’s handbook and employee’s contract usually include a vacation policy.

Be consistent with your policy

Make sure the policy applies to everyone. Uphold the policy terms with every employee to ensure fairness with everyone.

Encourage employees to take vacations

As you write a vacation policy and carry it out, encourage employees to take vacations. Let them know, especially employees who may be going through a low period, how to take care of their well-being and to take the time off they need.

Update your policy regularly

At least once a year, review your vacation policy to determine how well it still aligns with your company, employee preferences, and current goals.

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