Accounting for Vacation Pay

What you need to know about implementing a vacation policy for your business.

Believe it or not, there are currently no laws in the United States that require employers to offer vacation time (paid or unpaid) to their workers. The U.S. is one of the few nations in which the government does not regulate private work sector benefits. But the story changes once an organization is ready to implement an overtime policy. Once a policy is established, the company must be certain to comply with federal and state laws that apply. If you begin offering vacation time, your employees are then entitled to it.

In the U.S., business owners are not compelled to offer vacation pay, but if a business wants to remain competitive in recruiting top talent, vacation time is wise to offer. Good old competition and business economics win.

If you are a business owner or in charge of ensuring your company’s vacation policy is up to par, your first step is to check with your state’s labor laws regarding vacation for all of your employees – from the bottom to the top. Evaluate who is eligible by looking at who is part- and who is full-time. You also need to look into how vacation is pro-rated for part-time workers. Once you do a little research, you can then begin working on policies for your company.

Vacation Time Accrual

Vacation time is accrued and accumulated in certain ways and can vary by location. Check with your local labor law office to find out exactly how you are expected to lay things out so you are certain to be going by the book when you decide how your employees will receive vacation time. Most companies allow workers to accrue vacation time based on how long they have been with the company while others base it on pay periods.

Unused Vacation Time

You will also need to determine the obstacle of unused vacation time. Some states are a bit more stringent than others in this area. For example, states like California prevent employers from taking unused vacation time away from employees.