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Vacation policy: Keep benchmarks, formality in mind

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in Firing,HR Management,Human Resources,Leaders & Managers,Management Training

The summer vacation season is upon us, and that means it's time to dust off your company's time-off policy.

Despite lingering uncertainty over the economic recovery and travel safety, 77 percent of employees say they plan to take a vacation this year, up from 70 percent last year, says a survey by research firm Wirthlin Worldwide.

No federal law says companies must give paid vacation time. Still, most companies do, especially big ones.

The U.S. Bureau of Labor Statistics (BLS) says that 88 percent of large companies (2,500 employees or more) offer paid vacations. But that number drops to 83 percent for midsize businesses (100 to 500 workers) and 70 percent for small businesses (1 to 49 employees).

5 pieces to puzzle

Having a written policy is the safest bet. Here are five elements to address:

How much time. Most companies base the number of annual vacation days on tenure and seniority, granting additional days to reward years of service gradually or as an incentive to recruit and retain management-level employees. See chart at right to determine if you're on track.

Eligibility. At what point does the employee become eligible to take vacation and/or begin accumulating vacation leave? Typical benchmarks are after six months or a year. You'll also have to decide if part-time workers will earn vacation.

Requesting leave. How far in advance should employees schedule vacation, and to whom do they make such requests? How much time can be taken in one stretch? Normally, employees with seniority get top priority when vacation requests conflict.

Blackout dates. Make sure your policy states that the company's needs take priority, so vacations may need to be rescheduled. If your company is a seasonal business, your policy can require employees to schedule time off during the nonpeak months.

Unused vacation time. If vacation time goes unused by the end of the year, you have to decide one of three policies: The accrued leave is forfeited; employees are paid the equivalent in cash; or some or all of the unused time carries over to the next year.

Another administrative note: Vaca-tion pay does not qualify as a credit against overtime pay for purposes of calculating wages for hours worked, as required by the Fair Labor Standards Act (FLSA).

Have a formal, written policy

Vacation leave is such an entitlement that some employers often overlook the importance of having a defined policy. Getting too informal can cost you.

Case in point: A company fired a worker after 20 years on the job, claiming he failed to show up for three straight days and didn't call. The employee said he was scheduled to be on vacation. But his supervisor's calendar said the vacation was slated for the following week.

After the firing, a much younger employee was hired as a replacement. The former employee sued for age bias and won a $150,000 jury award. In upholding the award, the state appeals court criticized the way the company recorded vacation requests as "rather informal." (Pelletier v. Rumpke Container Service, No. C-000258, Ohio CA, 2001) (YATL, June 2001)

Bottom line: Don't leave any doubt about your vacation policy or about when workers are on vacation.


Sample vacation policy

"Each full-time employee may take vacation with full pay at such time as is mutually agreed upon between the employee and the owner or manager of operations. After one year of full-time employment, the employee accrues five working days of paid vacation annually; after two years, 10 days; after five years, 15 days; and after 10 years, 20 days. If an authorized holiday occurs within an employee's vacation period, equivalent time off with pay will be provided.

"Full-time employees may carry over up to five days of vacation leave per calendar year. If not used, remaining vacation time will be forfeited.

"All vacation leave must have the prior approval of the employer's supervisor. Check with your supervisor before making vacation plans. Maximum vacation leave to be taken at any one time is 15 days, unless prior approval is granted."

Source: The Book of Company Policies, published by NIBM, $59.95. To order, visit www.nibm.net or call (800) 543-2055.

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