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How to Set a Vacation Policy That Your Employees Will Love

6 November 2017 11 min read

vacation policy

It’s not unusual for employees to get worn out working five days a week (sometimes more), month after month.

They might show signs of exhaustion physically, mentally, and emotionally, which may also be an indication that they’re suffering from work-related stress.

This condition often arises when employees become overwhelmed with the amount and demands of work, especially when these exceed their capacity to perform normally.

Work-related stress is one of the most pressing problems in the workplace and may lead to other negative outcomes, mainly relating to decreased productivity both for the employees and the company.

Since work-related stress is considered a management issue, HR managers and business owners should take it upon themselves to create balanced working requirements where employees are encouraged to take time off work occasionally.

Unfortunately, there are companies that don’t pay much attention to how they should set up their vacation policy, not realizing that when employees are provided holiday and vacation leave, they can better avoid stress, illnesses, and other disorders, making them more efficient at work.


Benefits of a Great Vacation Policy

Based on statistics, British workers aren’t exactly eager to take a vacation even though they’re entitled to it. Some of them are too busy working to take holiday leave, while some worry that their colleagues or managers might think of them as less dedicated to their work for choosing to go on vacation.

While their reasons are varied, it’s worth pointing out that a company’s vacation policy should be attractive enough to entice its employees to exercise their right to have paid vacation days.

Having a great vacation policy in place is a win-win for both your employees and your company. Here are the major benefits for your company when employees take time off from work:

  1. Sending your employee on vacation allows you to review how that particular person has been performing at work. It’s not that a particular employee seems unreliable to you, but giving that individual X days’ worth of leave provides you an opportunity to cross-train a fellow employee, giving you a foundation of comparison between one and the other.
  2. Going on a holiday reduces employees’ propensity for errors. When employees are tired or overworked, they’re more likely to commit mistakes, which can disrupt the workflow and cause losses for your company. By contrast, well-rested employees think and act in a way that produces positive results for employers.
  3. When employees actually use leave provided by the company, it creates a more balanced work culture and increases office morale in general. What’s more, this culture will then act to make a company more attractive to other high-performing talents.

For employees, regular vacations take their minds off work-related stresses to help them maintain their health and well-being. Psychologists affirm that employees need relaxation time in order for the body to restore the energy/composure that’s been lost in stressful situations.

A great vacation policy also promotes work-life balance, as employees can pursue other interests that are as meaningful to their life as their work is. Just one of the benefits that pave the way for greater job satisfaction and increased work efficiency among employees.


The Issue of “Fairness”

Developing time-off policies can be quite tricky as you have to consider whether they’re fair to both parties. Between what the employer wants and what the employees want, HR needs to establish a middle ground so that employees can use their time off to achieve work-life balance, and the company, on its part, can continue running its business smoothly.

It’s equally important that you let your employees join you in determining the kind of rules that should be included in the policy. You’d want a time-off policy that’s mutually responsive to the needs of your employees and your company. This is a much better alternative to creating policy at random or simply following a popular trend without being sure it if will work for your own company.


Operating Within Legal Guidelines

Labour laws differ from one country to another, and it’s important that you abide by them, depending on where you are located. This is to ensure that workers’ rights are protected, and at the same time, saves your company from legal disputes that might arise from potential issues in the future.

The UK and the United States have totally opposing policies when it comes to paid vacation benefits for employees. The UK is a lot more generous, granting a minimum of 5.6 weeks or 28 days of statutory paid leave annually to full-time employees or those who work five days a week including bank holidays and public holidays.

Apart from the minimum number of paid vacation days, additional leave days may be offered to employees if it’s part of their employer’s vacation policy. Part-time employees in the UK may also get the same paid work leave as full-time employees although on a pro-rata basis.

In stark contrast, U.S. companies are not required by federal law to offer vacation leave benefits to their workers, though there are some states where paid vacation policy applies. It’s also the discretion of the company whether or not to give paid time off to its employees, although as much as 75% of companies agree to provide vacation time that may amount to 16 days on average per year.


Figure Out Your Goals

Vacation policy is part of the benefits package you offer to your employees, therefore the company’s holiday entitlement program should complement your goals for both employees and your company. You could design your time-off policy to help you:


Create a rewards system

You can encourage increased employee productivity by offering an employee rewards scheme that linked to your vacation policy. This will provide an incentive to high-performing workers. The incentive may come in the form of additional days of leave or its cash equivalent.

The point is to understand how much value the reward has to offer to the employee. A high-earning employee obviously might choose to have extra vacation time instead of a cash incentive to avoid burnout, for example.


Attract potential employees 

Well-Laid-Out vacation policy is definitely an attractive feature for job candidates who are looking for a work environment where employee well-being is openly promoted.

In fact, many job-seekers are unlikely to choose a high-paying job without a vacation leave benefit compared to a lower-paying job that incorporates a work vacation policy in its company rules.

In the increasingly competitive battle for talent, a great vacation policy could be the perk you need to attract the best job applicants to your company.


Minimize costs

A “use it or lose it” policy requiring your employees to use their vacation leave or forfeit it may be your best option if you’re trying to avoid financial expenses paying for employees’ unused vacation days within the year.

On another note, you could encourage your employees to take regular time off to help them minimize errors or do substandard work when they’re feeling the burden of being overworked.

Contrary to the policy of use it or lose it, the option of giving unlimited vacations to employees is meant to eliminate limitations on how much vacation time employees think they need.

It’s a new workplace trend, but its suitability differs for every company.

For example, a company that has concerns about support staff during peak season would do well to avoid offering extended vacation time to its employees. Critics of the unlimited vacation policy also contend that employees are either bound to abuse this benefit or that it’s not fair for other employees to fill in for someone who goes on an extended period of vacation.

On the other hand, being flexible with your time-off policy has a number of positive effects too. For one, it’s a way for companies to discourage a culture of having employees work for as long as they can, as working longer hours does not necessarily result in more output.

From  HR’s perspective, a more flexible vacation policy frees up the team from holiday tracking exceptions and making manual adjustments so they can focus more on other important tasks that add value to their HR function.


Tips for Employers

Whether you’re offering a fixed number of vacation days or unlimited vacation days, you need to have a clear set of guidelines that employees can use to plan their time off. The guidelines should also enable your HR team to implement paid-time-off rules uniformly across the company.

For your vacation policy to be effective, it should identify the following:

  • Who is eligible for holiday leave?
  • How many vacation days are employees entitled to?
  • How many paid days off accumulate a year?
  • How many unused vacation days can be carried over to the next year?
  • What’s the company’s rule on using paid vacation days during medical leave?

Here are a few tips for when you decide to develop a workplace vacation policy that’s appealing to employees:

Formalize Your Vacation Policy


Regardless of your business slows or peaks in a particular period, you need to issue a formal vacation policy to help you put a cap for when you want to impose one. You could also issue guidelines about potential blackout periods for vacation so that employees are informed beforehand. Give a heads up to all employees in case any changes need to be made to your vacation or blackout policy.


Cash Out Regularly


Paying out accrued holiday entitlement on a regular basis can save your company from acquiring liabilities, which you must be prepared to settle if an employee chooses to leave or retire. Being prompt with payments will also do wonders for your team’s morale.


Make It Easy For Your Employees To Go On Vacation


Some employees refuse to use their paid time off for fear that they might have a heavier workload upon their return. Make sure to address these fears by setting up vacation coverage guidelines or a system available staff to ensure there’s sufficient cover for their colleague’s absence.


Implement A Raffle Style System


This way, you could give certain employees the option to choose their vacation days, with the rest of the employees being able to enjoy the same privilege the next time around. A raffling system is fair to both employees and the company because workers get more flexibility and the business will always have enough staff at hand to maintain smooth operations.


Be Consistent and Transparent


Approving or declining vacation requests should be handled judiciously. You should, at all costs, avoid playing favorites or guilt-tripping with employees who come to you with a vacation request. For a productive culture to be realized, equal rights between employees need to be evident.

You should also be as transparent as possible with your employees. Any issues with a lack of clarification will end up giving the company a bad image.


Consider Giving Rewards To Those Who Work On Popular Days Off


This works especially if there’s a public holiday that falls in the middle of a long weekend when most employees would rather take the time off. As mentioned in a previous section, make sure that the reward you offer, whether an extra day off or a salary that’s double the employee’s rate, is going to add value to what the employee actually wants.


Encourage Your Employees To Have Fun


Remind your employees that you don’t expect them to check their emails during vacation but instead, you want them to make the most of their time off by doing something fun or healthy for them.

Make sure your message is clear. When employees use the time off, share that information with your team and encourage them to do so as well. As a result, other employees will see that taking time off is acceptable and they’ll be more inclined to use their leave days too.


What Vacation Policies Are All About

Whether you decide to give your employees regulated paid time off or an unlimited time-off policy, the most important thing to remember is to establish ground rules that are clear and fair to everyone. Creating and communicating an absence policy with a robust staff holiday planner will support this.

Also, make sure that your employees are part of the decision-making process. Keep in mind that the right balance for a vacation policy should be decided by all, not just upper management.

At the end of the day, you want your employees to take control of their health and well-being through a company program that lets them spend some time away from work to focus on personal growth.

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Katrina Bennett People Director at edays
November 6, 2017

Katrina is edays' own People Director with significant UK and international experience in delivering people strategy and value-adding HR solutions across a range of organisations and sectors (including Arriva, Boots, Rolls Royce, the utility and charity sectors). Katrina has over 20 years of experience in Human Resources and is CIPD qualified.