Vacation Policies 101

Posted on May 31, 2017 in Consulting


I love my work, but vacations even more.  I soon leave for summer vacation — a trip looking at colleges and then an escape with the wife sans children.  Before I take my much needed break, I decided to offer some tips on employer vacation policies. Or, as I note first, let’s consider calling it paid time off.

Tip One: Strongly consider Paid Time Off rather than vacation or sick time

Many employers offer paid vacation and paid sick leave as distinct benefits.  In this context, employees use vacation for rest and relaxation and sick leave for medical needs.  But we all know they get jumbled.  An employee wanting an extra day off may end up ill just before a planned vacation. Employees abusing sick leave for additional time off is an irritation to management and is a complete annoyance to HR.

Paid-time off evolved as a means of stopping the policing of sick leave.  PTO bundles sick and vacation time to eliminate the need to monitor time away.  With PTO we dispense with the obligatory doctor’s note every time someone has a bad cold or a stomach bug, based on policy.  PTO policies may also eliminate fake illnesses as the reason for the time off as it requires no explanation.  Some employees judge this to be more fair since healthy workers get as much time as workers who get sick more often.

Tip Two: Never “loan” PTO or vacation time

I have never understood why an employer would grant an employee PTO in excess of what is stated in a policy.  The “loan” is a request to violate policy.  Good employees never ask employers to break the rules.   Additionally, the “loan” establishes a new standard that all employees could claim and, if not granted, might create fodder for discrimination claims.   Keep it simple: stick to the policy and never advance additional PTO (or vacation time).

Tip Three: Cap PTO Roll Over

Allowing employees to roll their unused PTO (or vacation) into the next calendar year is bad for business.   The banked time can create a sizable liability on the balance sheet.  Also, large amounts of accumulated leave may make it difficult to manage the time off when an employee wants to uses it in long increments.  Most important, good employees need to be rewarded with time off and encouraged (perhaps forced) to use their annual PTO entitlement or risk forfeiting it.

I hope you all enjoy your summer vacations and that you encourage your colleagues to do the same.

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