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Summary: Paid vacation is one of the most attractive features of an employee compensation package.
Paid Vacation
Paid vacation is an entitlement to paid days off work that are mandated by law or offered by an employer. Paid vacation is also called paid leave and sometimes paid holidays, though paid holidays technically refer to paid days of leave on official public holidays. During a paid vacation, employees typically receive their normal pay but don’t need to go to work or perform any work-related tasks either on- or off-site.
How is paid vacation typically structured within employee benefits packages?
Paid vacation is one of the most attractive features of an employee compensation package. Employers looking to attract top talent may offer large numbers of paid vacation days each year and increase these days as the employee’s length of service increases. These paid vacation days are written into employee contracts for assurance and are designed both to give employees breaks and to incentivize them to work for the employer.
Often paid vacation accrues over time as part of a paid vacation accrual policy.
How do companies decide how much paid vacation time to offer employees?
In many countries, the government mandates a minimum entitlement of paid vacation days for workers. The number of days granted may be equal for all workers or may depend on factors such as the worker’s age, length of service with an employer, and status as a full- or part-time worker.
In general, employers will first look at how many vacation days are mandated by law. After that, they’ll usually offer as much paid vacation as seems to be standard for their industry. Many employers then add extra days to attract new workers or offer annual increases as a means of encouraging employees to stay with them.
What are the best practices for employees to request and use paid vacation time?
Employees generally know their paid vacation entitlements both by law and in their contracts. However, these days are rarely stipulated, and it’s usually up to the employee to plan their vacations and request to use their paid leave. The best practices for an employee in this regard would be to:
- Check with a supervisor: Asking a direct supervisor when it would be appropriate to take a vacation can help keep production consistent.
- Make a tentative vacation plan: Prior to making bookings and reservations, the employee should simply make a tentative plan for when they’d like to use their vacation days.
- Formally request paid vacation: The employee can make their formal request in consultation with a human resources (HR) manager or by using the self-serve function of a human resources information system (HRIS). This request should be promptly allowed, denied, or returned for modifications by the employee.
- Book a vacation: The employee should only make bookings for their vacation (travel, accommodation, etc.) after receiving formal permission from the employer.
What are the benefits of paid vacation for the workplace and employees?
While it might seem that workers reap most of the rewards, paid vacation actually benefits both employers and employees.
For employers, offering paid vacation can interest and attract top talent to their companies. Vacations are also seen as rest periods that let employees relax and focus on self-care. These periods give employees motivation to look forward to and also help to improve their mental health, leading to greater productivity in the workplace.
During these periods, employees can relax, spend time with family, or take care of personal business. Vacations can also be goals to work toward, which can increase employees’ morale and overall job satisfaction.
What are the legal requirements and common policies regarding the accrual, carryover, and payout of paid vacation?
Different countries stipulate paid vacations in different ways. Most countries decree a minimum number of paid vacation days per year that an employee is entitled to. In many cases, employees are only entitled to paid vacation according to the time that they have worked. For example, if an employee is entitled to 30 vacation days per year, they may not be able to take more than 15 days in the first six months of a year.
In many cases, employers allow employees to accrue vacation days not used in one period. If an employee entitled to 30 days uses only 20 of them in one year, they may be able to carry 10 days over to the next year and take 40 days of vacation.
Some countries allow employees to exchange their paid vacation days for cash. Any days they do not use in a set period might be paid out at an agreed-upon rate instead.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.
