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Example of a Vacation Policy for a Small Business

written by: •edited by: Linda Richter•updated: 11/18/2010

As a small business owner, there is no law in place that says you have to offer any benefits whatsoever. It’s beneficial, however, to offer vacation benefits, as well as some others. Jean Scheid offers a vacation policy for a small business that is based on what's offered at her own small company.

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    Why You Need a Vacation Policy

    Vacation Policies Are Good for the Small Business Owner Even the small entrepreneur, which I call any company that employs less than 50 people, should offer some benefits--including a vacation policy for a small business.

    Most employees tend to expect a paid vacation of some sort after a pre-determined length of service with a company, and failure to provide a paid benefit may cause you to lose valuable employees.

    Actually, it’s not good policy to deny this benefit. As a small entrepreneur, if you deny it, word will get out quickly on the street. You may not be able to find any effective employees to replace the valuable employees you've lost because you don’t offer the vacation benefit.

    On the other side of this benefit coin, the vacation policy for your small business doesn’t have to compete with the big guys.

    Image Credit (Freedigitalphotos)

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    Sample Vacation Policy

    The following sample vacation policy for a small business is based on what's offered at my own businesses, where I have always employed between 25-35 people--so less than 50:

    Vacation time does not accrue. You must utilize your vacation within the year it is available. For example, if your hire date was May 1st and you have 5 days, and you do not use the vacation days within the timeframe of May 1st to April 30th, that accrued vacation time is lost. Vacation time is accrued from your hire date.

    • One year of service = One week of vacation pay.
    • Two years or more = Two weeks of vacation pay.
    • Six years or more = Three weeks of vacation pay.

    If you are eligible for two or three weeks of vacation pay, the company asks, if possible, for you to divide your vacation days within two different times, or ensure that you have ample back-up to cover your position at the workplace. Vacation must be requested thirty (30) days in advance and approved by your supervisor. The company offers no personal days at this time, but you may utilize vacation days if an emergency arises.

    If you leave the company, for any reason, any accrued vacation pay will not be paid. You must be an active employee to receive vacation pay. The U.S. Dept. of Labor has no law stating that accrued vacation pay must be given to an employee when he quits or is terminated. The U.S. Dept. of Labor abides by each company’s handbook policies to enforce vacation pay.

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    Consider the Size of Your Company

    There Are Choices for the Small Business Owner When considering the sample vacation policy for small businesses presented here, the business owner must think about the size of his company. There are no laws that state you have to pay out any unused or accrued vacation time if someone leaves the company, nor do you have to let vacation time accrue.

    As a small business owner it’s often challenging to introduce company benefits that you can afford as far as costs to the company. Choosing a base vacation policy that does offer paid time off such as this, albeit limited, allows for the small business owner to consider other employee benefits such as health, dental, and retirement plans.

    Any paid vacation benefit will be welcomed, but don’t try and compete with large corporations where vacation, sick, and personal days are allowed to accrue and are paid out upon request or taken in large chunks—you may not have enough employees to cover your customer’s needs. If you employ this policy, make sure to include the verbiage in your employee handbook so employees understand how it works and when they are eligible to take vacation pay.

    It’s also a good idea to place the policy in writing in case you ever need to document your policy during an audit, employee lawsuit, or some sort of appeal by the employee. Having a written policy the employee signs off on will ensure state and federal agencies will defer to that written policy.

    Image Credit (Freedigitalphotos)