Giving employees vacation leave can increase the retention rate, but there are several things employers should take into account before implementing the vacation policy.
Vacation policy is a specific guideline established by companies, which sets out rules and regulations for claiming vacation, including the number of days provided to employees. Employers should explicitly establish vacation rules and implement the same set of principles to all employees equally. A well-thought-out vacation policy helps reduce half of the stress that businesses encounter when dealing with employee vacation matters. The policy should explicitly describe employees’ responsibilities during their time away from work, such as if they are required to find a substitute to take over their tasks while they are away, or if they must arrange their vacation time in a certain way or at particular times of the year.
Most employers understand that they have an obligation to provide all employees with vacation whether they work full or part-time. They also know they have the discretion to approve or deny the timing of vacations based on business needs. However, there remain misconceptions among employers regarding the vacation policy, below are some of them:
The first common misconception is that employers have the right to impose a “use it or lose it” policy on vacation entitlement. Minimum vacation entitlement is determined by the legislation in place in the jurisdiction where the employee works. When an employer chooses to exceed these minimum standards, it is referred to as a “greater benefit.” This is an important differentiator.
This “use it or lose it” policy is only allowed in certain jurisdictions, and where it is allowed it pertains only to the greater benefit. For example, if legislation requires that an employee gets two weeks of vacation, but the employer provides three weeks, then the employer may be allowed to impose a policy where the employee loses the extra week if it is not taken in the required time frame.
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When an employee leaves their job, sometimes their employers make a mistake by deducting vacation overpayments from their final salary. If an employer has a policy that allows employees to take their vacation in advance (before it is earned), a written agreement should be put in place whereby the employees acknowledge that if their employment ends before the vacation is earned, they must repay the employer any unearned amounts.
Some jurisdictions and/or collective agreements require the specific dollar amount of a deduction to be authorized by the employee. Otherwise, the employer does not have the right to deduct overpaid vacation.
Before implementing a vacation policy, it is helpful to gather employee feedback on what they want to receive from the arrangement. For example, ask if your employees prefer a week of vacation leave annually or three days of vacation every year that is paid by the company.
In developing a vacation policy, one key element to consider is if you believe your company has key employees. If this is the case, you may want to develop different policies to keep those employees engaged for the sake of the business. For example, if an employee has worked for your company for five years or more, your company may give this employee a vacation along with a plus one, all paid by the company. This way, vacation policy is a perk that can serve as both a company policy and a retention strategy when carried out appropriately.
Having clearly defined policies and procedures assists payroll practitioners in the difficult job of managing vacations and other employment standards. It is always important that those policies comply with current legislation and regulatory requirements. Companies should not design a vacation policy to push employees to take time off; rather, a vacation policy is a means to show employees that taking time off work is a healthy move.
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