Paid Vacation: Everything You Need to Know
Paid vacation days are those days when an employee is paid for taking time away from work.9 min read updated on February 01, 2023
Paid vacation days are those days when an employee is paid for taking time away from work. Most organizations give their employees some paid time off for vacation. Employees today, particularly the best ones, expect to be given paid vacation days as part of the employee benefits package.
Employers are not required to offer paid vacations. This gives them a lot of leeway legally, allowing them to choose how employees earn vacation days, who is eligible, when days can be taken, and more.
Offering vacation days is not just a nicety, but rather provides some benefit to the company. By being competitive, a company can attract the best talent, and by paying employees for some days off each year provides for a better atmosphere at work. Regardless of a company’s size, it pays to keep employees healthier and happier, and it is worth the cost.
A clinical psychologist, Francine Lederer, adds that people have better attitudes toward life and they are motivated more to go after those goals after being on vacation. Data also supports that employees are benefited by taking an occasional vacation. One experiment that was conducted in 2005 discovered that workers in construction became 24 percent less effective after working for 60-hour weeks than they were when only working 40-hour weeks.
For anyone that has been burned out, they know very well that there are real benefits of taking some time off. It does not only apply to those who perform physical labor. All employees need some time off to relax, and the business benefits by it, too. When employees have vacation time that is paid, it is also most likely that they will have other benefits, too, such as medical insurance and retirement plans. When an employee has paid leave, it helps determine whether or not an employee will actually take any time off.
Vacation Days in the U.S. and the World
In a study conducted by the Center for Economic and Policy Research, it was discovered that the United States is the only country with an advanced economy that does not guarantee employees paid time off. At the present time, about 25 percent of companies in the U.S. do not give their employees any time off. An amazing 23 percent of employees in America have no vacations paid for by their employers or any paid holidays. The average employee gets 10 days of vacation that is paid for each year.
In private industry, the number of full-time employees in 2015 who received paid vacation is more than 90 percent, according to the federal Bureau of Labor Statistics. The number of paid days for vacation ranged from five up to 30.
European countries, as well as in other parts of the globe, give their employees more vacation days with pay. Countries in Europe demand that employers provide their employees with 20 days off each year. Some countries in Europe do even better, requiring employers to give their employees as many as 25 to 30 days annually.
In the United States, three states provide more than any other: Maryland (17.6), Idaho (22.0), and South Dakota (21.0). On the other hand, there are three states that offer the least vacation days with pay: Kentucky (8.8), Alaska (8.0), and Mississippi (8.9).
In every country in the European Union, the law requires that every employer give their employees at least four weeks of vacation with pay. Austria guarantees its employees the most time off, making sure that each employee gets a minimum of 22 vacation days with pay, and as many as 13 holidays with pay each year. This is much more than the average employee in the U.S. private sector receives, which is an average of 16 days total for both vacation and paid holidays.
Vacation Accrual and Caps
In the United States, the number of days of vacation given to any employee is usually based on how many years the employee has been with the company, as well as their rank in it. As an example, employees will earn 3.0769 hours for each pay period that they have worked, when they are eligible for two weeks of vacation (10 days).
Most employees will start their jobs and receive one or two weeks off. This is rather standard in most companies. As they work longer for the company, they become eligible to receive more paid time off. In most cases, there is a maximum of between four to six weeks of paid vacation.
Most employees have come to expect that a paid vacation is going to be part of the comprehensive benefits package. There are no Federal laws that require that an employer give vacation days with pay, but better companies do offer them as a benefit.
A study that was conducted by the Society for Human Resource Management (SHRM), showed that employees that have worked for an employer for:
- One year typically receive nine days of paid vacation
- Two years get an average of 10 days of vacation with pay
- Three to four years receives n average of 12 days paid days off
- Five years of service get an average of 14 paid days off
- Six and seven years typically receive 15 vacation days
- Eight to nine years of employment at the same place often provides an employee with 16 days of paid vacation
- 10 years gives an average of 17 days of paid vacation
- 11 to 13 years of employment gives an average of 18 paid days of vacation
- 14 to 15 years of employment gets an average of 19 days of vacation with pay
- After having spent 15 years with the same employer usually gives an employee 21 days of paid vacation
Since there are no laws pertaining to a requirement of giving employees vacation days with pay, it is entirely up to the employers as to how much, which employees, and when. They could give employees a couple of days per year or as much as a couple of months – whatever they want. Most employers base vacation days with pay on industry standards and the expectations of the employees within a certain field.
If an employer wanted to, they could also give vacation time to some employees, but not to other ones. An example of this is that employers are legally only allowed to give paid vacation time to full-time employees. The Bureau of Labor Statistics, for instance, says that while 91 percent of full-time employees receive at least some vacation with pay, as few as 34 percent of part-time employees get any.
Although there is some pick and choose as to how they offer vacations with pay, an employer may not base decisions on religion, race, or disability. They are free to offer as little or as much as they want and that will be sensible for their business. There may also be a schedule applied to accrue vacation days. Many employers often require a certain waiting period before giving any paid days for vacation to new employees.
Companies may put a cap on how many vacation days an employee can build up without using them. When the cap is met, no more days can be earned until the employee uses enough of them to get below the cap. This policy encourages employees to use their vacation days rather than just letting them accumulate.
You Can Negotiate Paid Vacation Days
In some cases, an employee may negotiate how many days off with pay they will receive. This often occurs at the senior manager or executive levels. When an employee has built up a vacation time of five weeks and they are leaving their present organization, but the new company only offers two, it could prove worthwhile to try and negotiate for more. Since it is not required, nothing is lost by trying, but company policy, or just trying to be fair to other employees, may not permit it.
Negotiating for more paid vacation time can more easily be done in cases where employees are difficult-to-hire. They are also negotiated more frequently in cases where workplaces have unions. People with skills that are highly in-demand will also often negotiate for more paid days off.
Rules on Using Vacation
Companies also have a lot of leeway as to when their employees can take vacations. They may prevent employees from taking vacations during their busy times of the year. They can also require that employees apply during certain times for scheduling purposes, which may be a considerable time in advance. They would not want too many employees away during the same period.
Employers may also place a limit on how long a period can be taken as vacation at any time. New employees, in many cases, may have to wait anywhere between three to six months before being able to take any earned vacation time.
When an employee has been fired or is quitting a job, any unused vacation days may be eligible for pay. Nearly half of the states have laws that require employers to pay for any unused vacation time still on the books. Some states may not require it, but a company may still have a policy of paying for those days.
As many as five-sixths of employees working at places where their paid vacation days disappear at the end of the year used up all their time, but as few as 25 percent understood that these policies existed. Apparently as many as one-third of all senior managers never, or just once a year, told the employees of the benefits of taking vacation days with pay.
Even though many employees know about their benefits, some still do not take advantage of vacation days with pay. When taking a vacation, it is important to draw some limits on work while on that vacation, such as responding to emails.
A report put out by the U.S. Travel Association, revealed that as many as four out of every 10 Americans let some of their vacation days expire each year. This occurs even though as many as 96 percent of Americans understand the value of taking the time off. A different report, from 2013, put a number on these days lost annually at 3.2 days of vacation that expired annually.
Effects of Paid Vacation Days in the Economy
Some experts who were given counsel from 24/7 Wall St. said that they did not believe that giving employees vacation and paid holidays had any negative effect on America’s economy. A labor market statistician, Pascal Marianna, who works at Organization for Economic Cooperation and Development (OECD), observed that Germany and France have similar vacation days, but their economies are quite different. While the economy in Germany is healthy, France is suffering from a recession.
Common sense says that if an economy is not doing well that things like vacation days are more apt to be dropped for employees because they are not productive. When looking at the eight nations that give their employees as much as 30 days off a year, only the government of New Zealand spends less proportionally than the U.S.’s 40.3 percent GDP. Four of those nations spent more than 50 percent of their GDP. These statistics show that even countries that give their employees more time off can still afford to be rather generous to their employees.
Some countries, however, have economies not doing well and their economies are struggling. Four countries, Italy, Spain, Portugal, and France all had a rate of unemployment above 10 percent. Spain’s unemployment rate was the highest among all OECD members, at 25.1 percent.
One organization, the Center for Economic and Policy Research (CEPR), believes that countries may actually do better if they give their employees more time off. They believe that productivity will actually be increased if companies would adopt this practice.
Countries Where Workers Get the Most Time Off and Their Economic Standing
One country that provides their employees with much time off is New Zealand. It is the one country that is a member of OECD and is outside of the European continent that requires its employees be given as much as 30 days of a combination of vacation and holidays that are paid. Anytime an employee is required to work on a holiday they must be paid 1.5 times their regular pay. Even with the extra time off, it does not seem to have hurt the economy any, and New Zealand’s GDP is expected to see an increase greater than nearly all of the other developed countries for several years to come.
If you need help in understanding how much paid vacation to give your employees, or have other question about how to treat certain employees about their vacation time or paid holidays, you can post your legal need on UpCounsel’s marketplace. UpCounsel only uses lawyers who have graduated in the top 5 percent of the top law schools such as Harvard Law and Yale Law, and who also have an average of at least 14 years of legal experience. Many of them have worked with or on behalf of such companies as Google, Menlo Ventures, and Airbnb.