Vacation And Leave Policies
As summer approaches, many U.S. workers look with envy to their
counterparts in other countries. While most Europeans and Asians enjoy an
average of more than 35 days off a year, Americans lag far behind with an
average of 22 total vacation, holiday and personal days taken annually.
Although most employers cannot grant their employees a month off, many are
beginning to re-evaluate their vacation and leave policies in light of
lifestyle changes and competitive pressures.
Components of a Good Policy
Everyone is familiar with federal holidays, when all government offices
close down and traffic congestion eases dramatically. However, no federal
requirements or guidelines exist for vacation policies in private companies
(as opposed to many European countries which mandate a certain number of
vacation days per year). Policies in this country are left to the
discretion of the employer, although general practice and a competitive
market tend to dictate at least a basic package. A company that does not
offer time off similar to the rest of the industry is likely to have a more
difficult time recruiting employees. Similarly, firms with generous
policies can often use this “perk” as a recruiting tool.
Whatever vacation and holiday policy is established, employers should
make sure it is very specific, and that employees are fully informed about
it. A good policy will address the following issues:
* Accrual. Determine if vacation will accrue over a certain period of time
(such as eight hours of vacation for each month worked), or credited in
a block (such as two weeks in the first year).
* Accumulation. Can staff carry over unused vacation time from year to
year? Businesses should specify a maximum number of hours that an
employee may accumulate, above which the employee will cease to earn
additional time. It is generally a good idea to allow workers to carry
over at least some vacation hours; otherwise, those who cannot get away
early in the year may feel “forced” to take vacation at the end of the
year or at a time that is inconvenient for the company. Employees may
also feel cheated if they lose days.
* Use. Can staff members take vacation at any time, or must they do so only
during certain periods (for instance, if the business is seasonal)? What
happens to those hours if the employee does not take vacation time during
the specified period?
* Consistency. It is better for morale if vacation policy is uniform across
various levels and departments.
Flexibility Is the Key
Above and beyond the “typical” vacation package, some companies are
responding to their employees’ requests for time off in unusual ways such
as flexible scheduling. A study by Work/Family Direction, a Boston-based
consulting firm, revealed that 85 percent of the companies surveyed offer
one or more alternatives to the traditional 9 a.m. to 5 p.m., Monday
through Friday work week.
Companies such as Sunnyvale, California-based Scitor Corporation, for
example, are finding that overall productivity and employee satisfaction go
up when employees are allowed to work at the hours most convenient for
them. Another option is to include vacation time as part of a flexible
benefits plan in which employees can literally “buy” vacation time along
with other benefits.
Family Leave Isn’t Just for Women Anymore
In August 1993, the Family and Medical Leave Act (FMLA) went into effect,
requiring all businesses with 50 or more employees to grant up to 12 weeks
of unpaid leave in any 12-month period for the following circumstances: the
birth, adoption or foster placement of a child; care of a seriously ill
child, spouse or parent; or a serious illness that prevents employees from
doing their job. Under FMLA, staff members are guaranteed reinstatement
upon their return.
FMLA has forced many small companies to re-examine their leave
policies, and many questions have arisen as to exactly what is covered by
the legislation. The following are some commonly raised issues:
* Must employers grant intermittent leave? What if a staff member wants to
arrange a shortened work week in order to care for an ill parent?
According to Margaret Bryant, an associate in the White Plains, New York
office of the law firm Jackson, Lewis, Schnitzler & Krupman, intermittent
leave must be granted for medical care. However, if the leave is
requested for child care, the decision is left to the employer. “In
making that decision, employers should consider their ability to cope
with what may be a longer time period for the leave, since the 12 weeks
is calculated on the actual time away from the job, ” says Bryant.
“With any type of intermittent leave, the employee is entitled to the
total amount of available leave,” Bryant continues. “So, for example, an
employee could take 20 hours a week for 24 weeks, rather than 12 full
40-hour weeks (both total 480 hours).” However, the employer does have the
option of transferring the employee to a temporary alternative position (at
equivalent pay and benefits) if that job is better suited to a part-time
schedule than the employee’s regular position.
* Can employers require employees to use accrued paid leave? Yes, says
Bryant. “The law leaves the mix of paid and unpaid leave up to the
* What if the state has its own family leave legislation? “Employers must
abide by whichever is more generous to the employee,” Bryant advises.
However, only a few states have separate family leave laws. Also, some
states have pregnancy or maternity leave laws that are separate from
FMLA. When the two overlap, it can be difficult to sort through.
* Must an employer guarantee reinstatement to every worker? Not always.
FMLA recognizes that the temporary loss of certain staff can be
devastating for businesses. “Key” employees are defined as salaried
employees among the highest paid 10 percent. If a key employee leaves, an
employer does not necessarily have to guarantee “the same or equivalent”
position upon return if certain criteria apply.
First, the employer must prove that the company would sustain
“substantial and grievous economic injury” if the staff member is gone for
12 weeks. Second, the employer must inform the employee that reinstatement
cannot be guaranteed. Once notified, employees must be given a reasonable
amount of time to return to work if they choose. However, the definition of
“reasonable amount of time” is decided on a case-by-case basis.
Companies affected by FMLA should develop clear policies which spell
out how the firm will deal with the above questions.
As Americans place greater value on time off, employers are beginning
to re-evaluate vacation and leave policies. And it is in their own interest
to do so. For flexibility and generosity in granting time off helps
diminish the likelihood of burnout and often results in greater employee
satisfaction, ultimately benefiting the company.
FLEXIBLE TIME OFF PHILOSOPHY WORKS FOR SCITOR
Scitor Corporation, a Sunnyvale, California-based company of 220 employees
in several offices around the country, believes in rewarding its employees.
Human Resources Manager Linda Munsell explains, “We are a systems
engineering and project management firm. Our staff consists primarily of
professional engineers. We ask a lot of them, but try to give them
something in return.”
For example, Scitor has a very simple vacation policy: everyone gets
three weeks a year when they start and four weeks after their fifth
anniversary. Although vacation time is accrued monthly, employees have wide
flexibility in scheduling it.
Staff members are also given tremendous flexibility in setting their
hours and their time off. “We want people to work when they will be most
productive,” says Munsell. “For some, that means coming in at 3 p.m. and
working until midnight. Our only rule is that you must be at work when your
customer needs you there.”
Policies for sick leave and personal days also reflect this attitude.
Scitor employees do not accrue sick leave or personal time – they simply
take the time they need. Staff members are paid 100 percent of salary for
up to six months of sick leave, at which point they go on disability.
Munsell points out that even with such a liberal policy, the amount of sick
leave taken is well below the industry average. “Our average is less than
five and a half days per year. We build a lot of trust here.”
That trust is seen in what Scitor considers a fair and reasonable
policy toward personal time as well. “People have a lot of flexibility in
their hours so they can often work around personal need,” Munsell notes.
“Of course, there are times when things such as jury duty just can’t be
avoided. Scitor believes that if you need time off, take it.”
HOW EMPLOYEES CAN BUY VACATION TIME
Vacation time is one of the top three benefits employees would like
included in a flexible benefits plan, according to a survey by the Employee
Benefits Research Institute. However, only 20 percent of flex programs
currently offer vacation options. The Calvert Group of Bethesda, Maryland
joined that minority when converting to a flexible benefits package that
includes annual time off.
A mutual fund group specializing in tax-free and socially responsible
investing, The Calvert Group employs approximately 210 people, all of whom
are enrolled in the flex program. Known as Personal Choices, the plan
allocates each staff mamber a certain number of pre-tax “Choice Bucks”
which are then used to buy benefits such as medical coverage, life
insurance, dependent care spending accounts, disability and annual time
off. Annual time off includes what was previously vacation time, personal
days and floating holidays.
Bill Williams, training coordinator, explains how the vacation system
now works. “The amount of Choice Bucks employees receive is based on
salary, age and length of service. Each employee is given an annual block
of ‘core’ hours of time off. If they want additional time off, they can buy
‘optional’ hours with Choice Bucks.”
The process boils down to 3 steps:
* At the beginning of the year, employees fill out a worksheet, allocating
their Choice Bucks for different benefits. If an employee underspends and
has Choice Bucks left over, that money goes back into the paycheck. If
the employee needs more Choice Bucks, the difference is taken out of the
* During the year, employees use their core and optional hours for any
reason when they want or need to be away from work. Staff members are
required to use core hours before dipping into optional ones.
* At the end of the year, any remaining core hours can be carried over to
the next year, up to a maximum of 240. If optional hours are left over,
Calvert will buy back up to 40 per year. Anything else left above these
limits is forfeited, so it is in the employees’ best interest to plan
JoAnn Altmark in Calvert’s Pension Marketing division loves the new
program: “As a single person, I don’t need the same package as someone who
is married with children. Since I spend less on medical benefits, I can buy
more vacation days.” Altmark points out that previously, Calvert’s program
was very basic and offered few choices. Now people take an active interest
in setting up their own packages. Other employees echo Altmark’s
enthusiasm, remarking that the flexibility and personal choice elements of
the program are key to its success.