Avoid huge employee vacation balances

Experts suggest business owners have a firm vacation and rollover policy.

Most full-time employees, about 86 percent according to the Society of Human Resources Management, will have between six and 20 vacation days each year if they work for a business that offers paid vacation. Sixty-one percent will fail to use all of their vacation by the end of the year, with the majority having at least three unused
vacation days each year, SHRM reports.

That can be problematic for business owners who face too many employees absent in order to use vacation or the requirement to pay huge chunks of cash to employees owed vacation payout when they leave the company, according to ADP, an outsource company that helps manage human resources, payroll, benefits and other administrative items for businesses.

Human resources experts also say taking vacation is valuable to the employee. Being away from work with time to refresh and regroup can increase employee morale, wellness, performance, retention and productivity, all things that lead to a more positive work environment and office culture.

Experts suggest business owners have a firm vacation and rollover policy to eliminate such issues. SHRM reports that the ability to roll over time will determine whether an employee uses all of his or her vacation time. Otherwise, employees tend to save some vacation for the next year.

Any policy should include:

• The number of vacation or paid-time-off days the employee has and whether this is consistent across the board or varies by position, length of service or some other criteria.

• How those days will be allotted. For example, does the employee have to work a set number of hours to accrue vacation or does he or she receive a week at the start of the calendar year?

• The dates by which vacation must be used. This can help employers who find themselves with several
employees who have vacation days in the last quarter of the year that need to be used by year end.

• A strict number of vacation days the employee is allowed to rollover. SHRM reports that most businesses allow between one and 10 days to be rolled over.

• How unused vacation or rolled over days will be paid out should the employee leave the company. Experts advise business owners to have an attorney review any policy to ensure it meets all laws and regulations. Afterward, make sure employees have read, understand and sign the vacation/paid time-off policy.

If an employee is aware of his or her time off and still does not use it, SHRM suggests managers inquire as to why the employee doesn’t use his or her vacation.

If the business owner or manager notices that numerous employees have not used their vacation by the start of the fourth quarter, a human resources representative could send the individual a letter to remind him or her of unused vacation, the company’s policy, and what will happen with the unused vacation. ♦