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What Your Small Business Needs to Know About Vacation Policies

There are many reasons why you should have a vacation policy, or paid time off policy, in place regardless of whether you run a small business or large corporation. Employees need vacation leave to help themselves recharge, relax, and be the healthiest, best version of themselves. As an employer, it is up to you to determine what kind of policy you would like to enact in your business. 

Importance of a Vacation Policy

Not only can vacation time benefit employees in the perspective of being the most physically and mentally healthy that they can be, but they should be entitled to this time to do what they want outside of work. For some, that's an adventurous vacation out of the country. For others, it looks more like a leisurely stay-cation where they can plop onto the couch for a week and binge as much Netflix as they want. 

How they spend their holiday time is up to them. It's the time of year where anything they say goes. This can, in turn, benefit the company as people typically come back more refreshed and satisfied. Not only does a vacation policy ensure that your employees are getting what they need to be the happiest, healthiest versions of themselves, but it's also a great way to provide an incentive to work for you and your business. 

At the very least, your small business should cater to the standards that your province has for paid time off. Still, by providing additional vacation days and more flexible working hours, you create incentives for your employees to work at your business instead of with a competitor. This helps to create a healthy work-life balance for your whole staff. 

Not only that but new employees and seasoned staff will be happier and more driven to do the job if they are being compensated appropriately. Part of the compensation does come from time off! Having a good holiday policy is great for employees and employers, making it a critical document for the whole business.

Examples of Vacation Policies

Since each company has its own vacation and paid time off policies, there are thousands of different vacation policies to help you tailor your own. These might differ from each other based on the company, the location or a number of different factors. 

This is the policy of ABC Company as an example:

  • It is the policy of ABC Company to provide full-time employees with vacation time. The amount of paid vacation days allotted is dependent on the length of service an employee has worked at the company. 
  • Regular part-time employees earn equal parts vacation to the number of hours they work per week. After their employment anniversary, if they worked 20 hours a week, they would earn 20 hours of vacation. 
  • Vacation time may not be taken until it is earned, and it must be used in the anniversary year. This means it cannot be carried over. Earned vacation must be taken, and they are not entitled to pay in lieu of holiday.

Whether or not you incorporate a use it or lose policy or a yearly roll-over scheme is up to you. When putting together these guidelines, you will want to include them in your business’s employee handbook so staff can always reference the information should they need to. 

You can also specify the allotment of sick days or personal days allowed in the calendar year. Other types of leave, like maternity leave and medical leave, should also be included in this staff handbook.


Employment Standards, Wages, and Your Paid Time Off Policy

Consider these questions carefully when creating your own business policy for vacation pay and the amount of paid time off.

What is vacation pay?

Vacation pay is money paid to you so that you may take time off. If you don’t have allotted vacation days, you receive a vacation payout instead.

How to calculate vacation pay?

Vacation remuneration in Ontario must be at least 4% of the gross wages earned, excluding the vacation wages, within a 12 month vacation entitlement period. 

What are the provincial requirements for entitled vacation?

Depending on the province you operate your small business within, you will need to account for any laws and holiday standards, as well as federal guidelines. In Ontario, employers are required to provide their employees with either vacation pay or vacation time so that they can feel enabled to take time off without feeling like it’s hurting their bank account. 

If you are providing paid holiday, you must give a minimum of two weeks holiday time upon completing every 12 month vacation period. 

If you provide vacation pay, employees are entitled to a minimum of four percent of their gross wages earned within a 12 month holiday period. 

Things to Consider with Vacation Time

Take into account the below factors to ensure the business's holiday policy is full proof.

Paid time off (PTO) allotment

If you provide vacation time to your employees, you should also offer paid time off, or PTO. Many companies offer these days on top of vacation days so that if personal emergencies, personal days, or significant events arise, it allows the employee to take the time they need with less stress.

It is also important to note that staff can take unpaid time off. If your workers have used up their allotted holiday benefits and PTO, but still wish to take time off for personal reasons, they can opt for unpaid days instead. However, it is up to you to determine how long this can last, or whether they should switch to annual leave or some other long-term hiatus. 

Staff size

Depending on your business and the size of your team, something you may not always think about but is essential to consider is the staff size. For example, if you have a smaller-sized team and it may be a problem for all staff to take vacation time simultaneously, that’s something to consider when you discuss holiday time and policy with them. 

Protocol for submitting holidays

Having a protocol for submitting holidays is extremely necessary when considering vacation time. Not only does it help you manage your staff and keeps your team organized, but it also prevents issues from happening- like too many people being off at once. For this reason, it is important to have standards in place for both staff and managers to ensure this doesn’t happen. 

When to submit time off by

Creating a deadline for your staff to submit their time off can help everyone prepare for their absence. Whether that’s finding staff to cover their responsibilities or giving payroll a heads up on processing vacation wages, it is essential to ensure there is enough time to prepare the business. 

It doesn’t necessarily need to be months in advance, but providing a couple of week’s notice can help prevent the stress of having fewer people in the office. 

How to keep track of employee schedules with time tracking software

Time tracking is vital for all small businesses, especially if your employees are receiving vacation pay. This will account for hours that are worked as well as hours missed. 

QuickBooks has an excellent timekeeping software called QuickBooks Time. This software has enabled thousands of companies to improve their time management, and they have significantly benefited from this quality software. If you’re interested in using QuickBooks, you can take advantage of our free trial and try it for free today!

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