What Kind of Vacation Policy Should You Offer

Author: Fundbox Team | October 9, 2014

Many small business owners wonder whether they should offer employees a vacation policy with a set number of vacation days, or allow employees to take reasonable vacation allowances as needed. This question often comes from a need to manage cash flow, and prioritize work while certain employees are out of the office. With the growing number of small businesses and startups, there’s no one-size-fits-all solution, and the answer often depends on several different factors.

The dangers of an open vacation policy
With an open vacation policy in place, business owners may worry that employees could overuse or abuse the “unlimited” number of days off. Employers whose income relies heavily on their workforce may also see a crunch when one or several employees are on vacation at the same time.

In industries like marketing or technology, many employees feel that disconnecting while on vacation isn’t actually possible. Employees may choose to keep an eye on their email while on vacation for two reasons: first, they may feel like their work load is too heavy or important to say “You’re on vacation; don’t worry about it!” Second, employees may feel like their job is at stake, because if something goes wrong at the office, and their colleagues solve the problem without them, they’ll be considered redundant. In addition staying connected while on vacation has another downfall – without the ability to disengage, problem solving skills, ideas and creativity can become stagnant.

The dangers of an accrued vacation policy
On the other hand, accrued vacation policies have to stay competitive to bring in top talent, and tracking vacation accrued and vacation used can become tedious.

Employers who consider implementing an accrued vacation plan must take into account that work-life balance is increasingly important to employees from younger demographics. This means having a cap on vacation days may not appeal to new talent. Besides this, a business has to decide whether an open vacation makes sense for their employees based on the type of product they produce.  A landscaping business may use accrued vacation days and not an open vacation policy because the work is done on the jobsite, on a per-job basis.

How to decide which vacation policy to adopt
To decide what type of vacation policy works best for your business look at the product you produce, the size of your company, and the roles of each employee. If your product is mainly technology based, you have a fair number of employees who do the same type of work, or you have many high-level or young employees, an open policy will probably work for you. If your business is labor based, if you have few employees, or those employees do not often dive into high-level, management-style tasks, you may find that an accrued policy makes the most sense.

Look at the pros and cons of each type of vacation policy, and whether it makes sense based on your industry or business model. Once you decide which policy to use, you can begin making decisions about how to appropriately manage your work and cash flow around employee vacations.

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