How Much Paid Vacation Should I Offer In My Small Business?

People on the beach
Vacation time is important for employees to rejuvenate and be more productive.
People on the beach
Vacation time is important for employees to rejuvenate and be more productive.

Just like everyone should be exercising regularly and eating right, vacation time can be lumped right into these important activities. Employees must take off some time to recharge their bodies and minds throughout the year to stave off stress and be more productive individuals.

Let’s examine some of the concepts to consider when deciding how much paid time off you should offer to those who work for you.

Common Paid Vacation Time Benefits

All small businesses and larger firms vary when it comes to how much paid vacation time they offer to employees. Two weeks of vacation time, which typically equates to 80 hours or 10 workdays, is the most common timeframe to offer employees. However, some companies may only allow one week of paid time off, while others may give workers up to four or five weeks of free time.

Of course, paid vacation time is not simply given out for “free” in many employee agreements. Individuals are often required to earn the time off by accruing a certain amount of paid time off during each pay period they work. For example, in a two-week pay period, an employee may accrue about 3 hours of paid vacation time.

In terms of rolling over unused vacation days, many employers require that their workers use this time off before a certain deadline. Otherwise, they will lose it. This may be enforced as a measure to encourage the use of these vacation days so that employees do not get burned out after working for several consecutive months with no time away from the office.

More Time In Means More Time Off

A nice incentive to keep your most hardworking talent on your team is to offer increasing periods of paid vacation over time. For example, after an employee works for your plumbing company for 5 years, you may choose to offer this loyal individual a third week of paid vacation time. Some companies offer multiple additional weeks of time off if an employee stays on for 10 or 20 years. This is simply another nice benefit to reward those who have paid their dues and put in lots of hard work over the course of their careers.

Common Paid Holidays

In addition to offering at least a week or two of paid vacation, there are several federal holidays throughout the year that most businesses give off, unless there is a reason to be open on these days for sales or other purposes. These holidays include:

  • New Year’s Day
  • Memorial Day
  • Fourth of July
  • Labor Day
  • Thanksgiving Day (and often the Friday afterward)
  • Christmas Day (and often Christmas Eve or the day afterward)

Determining Your Company’s Paid Vacation Allowance

First off, it’s important to understand that there is no federal law on the books that mandates any specific rules about whether employers must offer vacation time – or whether they must compensate employees for time away. Thus, it is typically up to each employer to decide these rules for their employees.

Several factors should be considered when setting a paid vacation allowance for the employees in your small business. Ask yourself the following questions:

  • How many employees do I currently have in my business?
  • Do I have part-time employees, full-time employees, or both?
  • If I offer X amount of vacation days each year, will it impact my business in any way?
  • Do I have the financial resources to offer X amount of paid vacation days each year?
  • Are some of my key employees deserving of more time off to keep them satisfied and loyal? Or should I offer a blanket vacation policy to everyone?
  • Should I allow employees to roll over unused vacation time to the following year?

As you can probably tell by now, setting vacation time is very subjective to each business owner. So, take some time to consider the potential options you may wish to offer your employees. If you can come up with a plan that attracts and keeps talent, and such a plan won’t break the bank for you as the business owner, this would be the ideal scenario.

Get more small business tips and accounting assistance by teaming up with 1-800Accountant. Call 1-800-222-6868, or click over to www.1-800Accountant.

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