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4 steps to a simple vacation policy
My go-to policy, and how to make yours.
Michael Girdley
March 18, 2025
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Hi folks!
Every week, I’m sharing some quick, practical pointers on one aspect of running a small business.
Today: how to make a vacation policy your team appreciates.
Things to consider
In the US, businesses aren’t legally required to provide paid holidays or vacation. But most places do anyway, and many employees expect vacation days as part of a job offer.
So if you do offer vacation, make sure you know your state’s specific laws, specifically around:
How vacation time accrues
How it’s paid out
Notice required before taking a vacation
Whether unused vacation must be paid out on termination of employment
And if you have full-time remote workers in other countries, make sure you understand their local labor laws.
(This is why many employers hire overseas employees as contractors — if you want to get into the weeds on this, reply to this email and I’ll can connect you with the team at Near!)
Making a vacation policy in 4 steps
Define your standard paid holidays.
Most companies observe federal holidays like New Year’s Day, Independence Day, etc.
Then consider adding additional days like Christmas Eve or the day after Thanksgiving, and locally significant holidays (like Mardi Gras in Louisiana).
Decide how many days of paid time off you’ll offer.
On average, private sector employees have 10 days of paid time off (PTO) once they’ve completed one year of service.
Tech often leads with an average of 25 days a year (or even unlimited vacation, which stinks). Retail and hospitality generally offer less.
Many companies offer increasing vacation time with tenure.
Set the rules around taking time off.
The key questions to answer:
How is PTO accrued? A lump sum at the beginning of the year, or incrementally every month?
How much notice do employees need to give before taking PTO?
Does unused PTO roll over at the end of the year? (If so, set a maximum amount for rollover.)
Are there “blackout” periods when employees may not take PTO?
Communicate and encourage!
Make sure your employees can easily access all these details.
Depending on the size of your organization, find some software to manage vacation requests.
Then make sure your employees are actually taking it!
My ideal vacation policy
I let my companies decide their own vacation policies, but here’s my answer when people ask:
Three weeks vacation, but FORCE employees to use all of it. And when they’re on vacation, expect them to be 100% offline.
This plan has three significant benefits:
Counters the “always on” mindset that a lot of companies have (whether they intend to or not) — so your team actually gets the rest they need to do their best.
When employees HAVE to take time off, they’re forced to document what they do or train other people. Good for the company, good for their growth.
And when no critical process is completely owned by one person, it reduces the chances of an employee defrauding your business. (It happens — here are my tips for preventing it.)
What do you think?
Hit reply and let me know what you’d do differently.
Michael
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