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Small Business Vacation Plan

We’re a small business and we’re starting to consider what type of vacation plan to offer. We’re having difficulty deciding whether or not to allow unused vacation time to carryover in to the new plan year.

Vacation benefits are very important to just about all employees regardless of company size. However, the operational needs of a small business differ from those of a large corporation.

When determining the specifics of the vacation plan consider what issues may arise when employees use their vacation time and then determine which method will best prevent those issues.

The most common issue is that small businesses tend to have more difficulty in covering shifts especially when employees tend to request the same time periods off. So, a use-it-or-lose-it plan may not be the best option since employees will often rush to use all of their remaining days off before the plan year ends. Being able to accommodate all the time off requests may prove difficult. And, not being able to do so will lead to unhappy employees.

There are still plenty of benefits to a use-it-or-lose-it plan for a small business.

This type of plan encourages employees to actually use their vacation time. Employees who take time away from work usually have more satisfaction and engagement with their job ultimately resulting in increased productivity and retention. Also, a use-it-or-lose-it plan prohibits employees from accumulating a lot of vacation time and reduces the likelihood of the employer needing to payout unused accrued vacation time when an employee separates from the company.

Allowing employees to carryover their unused vacation time may result in employees banking their time and taking one large chunk of time off which can be even more troublesome for a small business that relies on a few employees. (Of course, this could be resolved with simply adopting a maximum amount of time that can be accrued, carried over, or taken all at once.)

If staffing is a significant issue, then you may consider closing your business for one or two weeks (maybe one week in the summer and one week during the holidays). This has become a fairly common practice amongst small businesses that struggle with adequate staffing during common vacation request times. This practice allows employees to take the time off they need without significantly impacting business operations. Employees can be mandated to use their vacation time during these closures. Just keep in mind that there are compensation requirements for exempt employees who have exhausted their vacation time. Of course, the feasibility of this method completely depends on the type of business.

Though there is no federal law that regulations vacation time, some states have adopted such laws. Many of these states simply require employers to abide by the terms of their own established practices and policies. However, some consider vacation time to be earned wages and prohibit use-it-or-lose-it policies. Thus, it’s important to be aware of any applicable state or municipality law on the matter.


This entry was posted on Tuesday, May 16th, 2017 at 2:38 pm and is filed under
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