Guide to Establishing a Vacation Policy for Your Business

Count the days

The federal government doesn't require you to offer any paid days off. However, more than three-quarters of American workers get paid vacation days, and you'll have trouble attracting good talent without a policy.

I recommend: Get the facts on your legal obligations at the U.S. Department of Labor's Web site. Expedia.com's annual Vacation Deprivation study shows that the average American received 14 vacation days. For more complete information, Payscale.com breaks out average vacation days by more than a dozen criteria, including age and industry.

Use advance notification, blackout dates and other limitations

If all your workers take vacation at the same time, your business could come to a standstill. Prevent this from happening by requiring a certain amount of advance notice, and/or by establishing certain peak business dates as off-limits for vacation. Any limitations to the vacation policy need to be stated clearly in your employee handbook.

I recommend: Download a sample employee handbook template from the EmployeeHandbookStore.com and find vacation forms at HRDirect.com. Discover several useful strategies for maintaining business continuity while key staff members are on vacation at About.com.

Consider instituting a

More companies are replacing the traditional vacation, sick and personal days with "Paid Time Off," which lumps all categories into one bank of paid days. The idea is to keep employees from surprising employers by calling in "sick" in order to take a weekend trip.

I recommend: Salary.com takes a look at paid time off policies. Review some of the pros and cons of this approach at Monster.com.

Increase vacation time with length of employment

Though you should adopt a vacation policy that gives workers equal access to time off, length of employment is the one criterion that employers generally use to create progressive tiers of vacation time.

I recommend: The Bureau of Labor Statistics has an online chart (dated, but still reliable) of the average number of vacation days for U.S. workers at differing tenures.

Set policy for unused vacation days

It's up to you whether to let employees accrue vacation days by carrying over unused days into the next year. Some states require that you compensate employees for unused sick days when they quit or are terminated.

I recommend: Nolo.com addresses this in its useful guide to Providing Vacation and Sick Leave. You can research your state its State Laws page.