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How to Provide Vacation and Sick Time

How to Provide Vacation and Sick Time

Both company owners and employees may often find it hard to believe that there's no federal law requiring a business to provide paid holidays, vacation or sick leave. However, there are indeed state laws, and the 21st-century workforce typically acknowledges common standards when it comes to time off. If you want to keep your workers happy and healthy, you will need to offer a package that entitles them to some time away from work, for both leisure and personal matters. Here's what you need to consider in creating your vacation and sick leave policy.


Again, you're not required to offer paid holidays. Most companies do, though, so you'll have a hard time attracting top talent if you don't. Typical paid holidays include:

  • New Year's Day
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Christmas Day

The day after Thanksgiving, Martin Luther King, Jr. Day and Presidents' Day are other common holidays.


Employees generally expect one or two weeks of paid vacation per year. How they accrue that time is something you'll want to think about. Some employers grant an employee's entire vacation time immediately upon hiring. Others implement a policy stating the employee must work at the company for a certain number of months before using vacation time. Another option is to set an accrual formula. For example, employees gain 8.5 hours of vacation time per month.

Sick Leave

It's important for you to offer sick days, because otherwise employees will be inclined to come in to work sick, possibly spreading their illnesses among your staff and clients. Employers should offer somewhere in the neighborhood of five sick days per year. Also keep in mind that the Family and Medical Leave Act requires you to offer up to 12 weeks of unpaid leave to cope with a major medical diagnosis, family illness or the birth of a child.

Paid Time Off

Some employers end up lumping together all time off and calling it "PTO" – paid time off. This is an effective method for giving your employees some leeway while still ensuring that they can't abuse the system. In PTO, sick days become "personal days."

Unpaid Time Off

Federal law does require employers to offer unpaid time off for jury duty, voting and military service. And really, when you think about it, unpaid time off should be the least of your worries. If you're looking for somewhere to be lenient, this is the outlet.

If employees are willing to take unpaid time off, they must either a) really have to tend to something, b) really want to take a break or c) really be on top of their work and confident in their ability to miss time. Either way, you're not paying them for the time off, so it shouldn't be a major focus unless it severely disrupts your workflow or becomes a habit.

Also, consider the morale and practical issues if you don't pay employees for such essential positions as standard Army Reserve training or jury duty.

Free Time Off

Here's an example of how you can essentially shape your company's culture through your time-off policies. Greg Malloy, CEO of Bloomfire, says he started a "free time off" policy at his firm to put trust and freedom in the hands of his workers. Essentially, there's unlimited time off, as long as you get your work done.

"When you treat people like mature, responsible adults, they act like mature, responsible adults," he says. "Our employees love it, and they don't abuse it. I don't know how prevalent this is becoming among companies, but I would highly recommend it."


It takes quite a bit of time and thought to come up with a system you feel comfortable with. Contact me today and I'll help you weigh the benefits and drawbacks of any policies you may have in mind.


Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

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