Vacation buying appeals particularly to short-service employees who haven't earned much vacation time and to those needing additional time off for parenting responsibilities. Vacation selling appeals to employees who prefer cash compensation over paid time off or who cannot take their full vacation allowance and would otherwise forfeit the unused days.

Employers typically limit the number of days that may be purchased. Employer limits range from 2 to 15 days. If you plan to allow this practice in your company, make sure your program conforms to Section 125 rules of the Internal Revenue Code. Some employers require year-end forfeiture of these programs.

Some employers permit workers to buy the vacation time from the company only, while others permit employees to donate or sell vacation time (such as in a sick time bank) to or from other workers. Either way it is important for your organization to have clear policies in place to avoid potential misunderstandings.

Reprinted from "Best Practices in Compensation & Benefits" with permission of the publisher, Business & Legal Reports, Inc. Copyright 2000, BLR. --