Do you ever find it interesting that some of the most tangled topics of HR administration primarily concern the hours when your employees aren’t at work? When employees are in the workplace, we have a pretty good idea of what they should and shouldn’t be doing and how to reasonably regulate their work-related behavior. But when they’re off-duty, using social media, and maintaining the “life” part of that work/life balance, things tend to get a little muddy.

Leave is certainly one of these tricky topics. How many pages of your handbook are dedicated to the details of the days your employees don’t have to be at work? Now, how many handbook pages are dedicated to their acceptable behavior at work?

Lately, amid already trending developments in state and local paid sick leave laws and, most recently, national efforts to permit private employers to offer comp time in lieu of overtime, another form of employee leave has been an incredibly hot topic of inquiry from HR.BLR.com^® subscribers. It’s that other type of paid time off—vacation time.

Vacation, All I Ever Wanted

It’s a rare occurrence to encounter an employer that doesn’t provide some form of paid vacation to employees. Employees generally consider vacation time to be one of their most important and valuable workplace benefits; a skimpy vacation policy may be as much of a deal breaker to a new recruit as a conservative salary or meager benefits package—after all, the latter two may be more likely to change over time.

And yet, studies have shown that more than half of American workers fail to use all of their annual vacation entitlement. Vacation is so important, yet we also take it for granted. In fact, because vacation is such a prevalent benefit—practically a given expectation—many employees and employers alike don’t even realize that there is generally no legal requirement that private employers offer paid vacation.

That’s right—there is no federal or state law that entitles private sector employees to paid or unpaid leave for vacation. Generous vacation policies exist because generous employers (and generous competitors) exist.

Vacation, had to Get Away

This isn’t to say that, just because the law doesn’t require it, employers shouldn’t grant vacation. (After all, the law doesn’t require employee handbooks, either, and I certainly think those are a must, too.)

But the absence of specific legal minimum requirements means that employers do have a significant amount of leeway in which to be creative (and competitive) with their vacation policies. Employers should take advantage of this rare freedom and offer creative and customized policies that best meet the needs of their workplaces, while also providing employees with rest, recuperation, and a fresh perspective on the projects, challenges, and goals awaiting their return.

We’re familiar with the common tactic of rewarding employee loyalty and longevity by providing more leave as years of service increase. Employers may also offer more leave, not only to higher level positions in management and executive roles, but also to those that tend to incur higher stress (and, therefore, are more susceptible to turnover if employees aren’t given time to reset and refresh).

The freedom employers have in administering vacation policies can also be a valuable recruitment tool in particularly competitive industries. As long as your policies aren’t discriminatory—e.g., you can’t give employees more or less vacation based solely on a protected status or characteristic—then the only limit to your strategic use of vacation time is your creativity (and, well, presumably the need to get some work done during the year.)

State Law Specifics

As noted, there are also no state laws that require private employers to provide time off for vacation to their workers. Sick leave, bereavement leave, family leave—yes, but not vacation.

Rather, it isn’t until an employer has made the decision to offer vacation time to workers that state laws and court decisions have an opinion on the matter. Specifically, once leave has been promised and/or earned, then state laws and court decisions do regulate what employers can do with employees’ banked vacation time, both in carrying that time over from year to year and in paying it out at termination.

Thus, even though vacation isn’t required by any state laws, the 99.9% of employers who have decided to offer vacation must be familiar with the laws in their state(s) of operation. What happens when an employee leaves the company? How do you handle the vacation time that is owed to him or her?

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