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The Importance of Well-Written HR Vacation Policies

hr vacation policies

Your vacation policy must outline how much leave is provided to employees, and whether or not they may carry over any unused vacation days.

Some companies encourage work-life balance by offering unlimited PTO; others impose minimum time off requirements.


Employees will likely take more pleasure from taking vacation when their company prioritizes it as an employee perk. Not only does taking time off help employees relax and recharge, it can also lower stress levels and boost productivity when workers return to the workplace. With stress-related health care costs totaling hundreds of billions worldwide, businesses should strive to ensure employees maintain a healthy work-life balance for optimal productivity.

Develop an effective and legally compliant vacation policy requires attention to several areas, including eligibility, accrual and arrangements. HR professionals should consult a labor attorney in order to ensure their policy complies with state and federal regulations.

An effective PTO policy must clearly outline what types of time off are available and how employees earn them, whether or not their vacation days must wait until their employment anniversary date to use them, and the maximum carryover they may carry over from year to year.

Some companies have implemented “use it or lose it” policies regarding vacation time. While these can encourage employees to use all their PTO, such an approach doesn’t work well when applied to nonexempt employees who must receive overtime pay when working over 40 hours per week under wage and hour laws.


Employers that offer vacation time to their employees should ensure a clear, well-enforced policy to help maintain consistency and avoid confusion among employees, as well as ensure the company complies with any state or federal labor laws regarding paid time off offered to workers. HR managers may need to seek legal advice regarding compliance issues.

Policy should address who is eligible to accrue vacation, how it should be calculated, the rules around requesting time off and any procedures regarding rescheduling or denying requests for PTO. Furthermore, policies concerning PTO should not conflict with terms in collective bargaining agreements or employment contracts.

If an exempt employee has taken advantage of all available vacation and personal leave days, their pay may need to be reduced in accordance with the Fair Labor Standards Act in whole day increments rather than their standard hourly rate. If there is any conflict about how best to resolve it, supervisors or HR should be consulted as needed for resolution of such disputes.


Vacation policies give employees peace of mind. They set forth the rules surrounding how much vacation leave an employee can take and when it begins accruing; as well as when and how it ends. A good policy also details how it’s administered when someone leaves.

Vacation policies must strike an appropriate balance between employees’ rest needs and operational demands of the University. They should provide procedures for requesting vacation such as how far in advance to submit requests and who they should go through for approval, how much time an employee may take off at one time, peak periods when requests might be denied or restricted e.g. busy times of the year etc.

Employers should set the maximum allowable carry-over amount of vacation from year to year, taking into account state laws or regulations and collective bargaining agreements or contracts applicable. A “use it or lose it” policy for paid time off may prevent employees from accruing too many hours and encourages them to use all available hours before leaving employment. This may help people from amassing too many vacation days while encouraging employees to use up all their leave before departing the organization.


An effective vacation policy can help to alleviate confusion and avoid disputes among employees. It should detail how employees can book time off, any advance notice requirements necessary, any blackout periods during which vacations are not permitted and other pertinent details. Furthermore, it should address how unused vacation days will be handled – some companies allow employees to carry over unused days while others simply forfeit them.

Accrual-Based Vacation Policies

Accrual-based vacation policies typically reward employees based on their tenure with the company, thus encouraging employee loyalty and retention. It may also be effective in creating a healthy work-life balance and reducing burnout. Employers can select how best to track accruals: annually, daily or pay period basis etc. It should be updated frequently in order to remain compliant with laws and regulations.

Unlimited Vacation Policies

Progressive vacation policies that do not limit available vacation days can be an invaluable recruitment tool for companies seeking innovative talent, particularly among millennials and Gen Z employees. By giving employees greater autonomy, this policy type can increase morale and productivity by cultivating a culture of trust and self-accountability among staff members. However, to achieve optimal results this requires strong leadership with open communication channels to ensure employees do not abuse its benefits and abuse this approach to PTO allocation.

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