Sample Policy: Vacations

The following sample policies were excerpted from The Book of Company Policies, published by HR Specialist, © 2007. Edit for your organization’s purposes.


Sample Policy 1:

This first policy stresses the importance of taking vacation time by forbidding carryovers except when special workloads make it impossible for employees to take the vacation due them:

“XYZ believes that vacation is important to the health and well-being of our employees and encourages all employees to utilize their vacation days. Therefore, XYZ will not accumulate unused vacation days or pay for unused vacation days. . . . In the event special work demands prevent an employee from taking all available vacation days, however, a request may be made to carry over no more than five days into the next vacation cycle. To be effective, approval must be in writing.”

Sample Policy 2:

This second policy goes on to specify how vacation time accrues and when it may be used. It also specifies what happens if the employee is fired before using accrued vacation days:

“If an employee is terminated prior to completion of the Introductory Period, no vacation days are accrued . . . but once that time has passed, an employee will be entitled to vacation pay for accrued but unused vacation days on a pro-rata basis.”

The second policy specifies how vacation days are accrued and alerts employees to the need to obtain their supervisor’s approval of their leave:

“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 employee’s supervisor. So please 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 by the manager of operations.”



On average, U.S. companies have been cutting back on the number of vacation days they give employees. Nationwide, workers now get an average of 11 vacation days per year, versus 12 two decades ago. Nevertheless, companies recognize the payoff of giving employees a respite, and many still insist that employees take vacation on a regular basis.

In determining vacation policy, you must specify to employees how they accrue vacation time, the terms under which vacation is to be taken, how to request the time off and what happens to unused vacation if the employee leaves the company. Union agreements or individual employee contracts may limit the options.

Some issues to consider when drafting your policy:

  • How much time. Employees earn so much paid vacation per work period. For example, a two-week-a-year vacation would accrue at .833 days per month worked. In many companies regular full-time employees accrue one day of paid annual leave at the end of each month after the first six months of employment. Exceptions: Time spent on leaves of absence for jury duty, military service or extended illness usually does not count for vacation accrual.
  • Eligibility. At what point does the employee become eligible to take vacation, i.e., after six months or one year of employment?
  • Requesting vacation time. How far in advance should employees schedule vacation, and to whom do they make such requests? How much time may be taken at one stretch? Normally, employees with seniority will get priority when vacation requests conflict. Also, make sure your policy states that the company’s needs take priority, so vacations may need to be rescheduled or requests denied.
  • Unused vacation time. Can employees receive pay in lieu of vacation? At what point do they lose accrued vacation time, or may it be carried over from one calendar year to the next? Many companies insist that employees use accrued vacation within a certain period or lose it.