Last updated on July 10, 2025
All work and no play makes Jack a dull boy. And these days, all of us feel like Jack.
Let’s face it: sometimes it’s nice to step away from the daily grind. Working five days a week not only means you have a lot on your plate, but it may also be mentally and physically exhausting. Some people prefer working long, difficult hours. But many others get overwhelmed just thinking about it. That’s where a vacation policy comes in.
A vacation policy basically tells you how many days off you’re entitled to during the year. The number of days usually depends on the culture of the particular company. In some places, the policy is very rigid, in others… not so much. Because sick leave and vacation policies are among the most frequently offered benefits to employees, they tend to go hand-in-hand.
The benefits of having a vacation policy
A vacation policy is a determining factor in pay structure and how much vacation time you receive as an employee. When deciding on an amount, your company needs to look at the long-term productivity of its employees and where an employee ranks concerning that productivity. It must then come up with a policy that makes sense for the business as a whole.
For example, if one of your employees works for 5 years for your company, she might deserve more time off than someone who has only been there for a couple of months. Fair play, right?
Moreover, vacation policies are also an HR necessity. A vacation policy outlines the terms of employee vacations, including the total number of company-approved leave days allowed. It also includes any stipulations upon how much vacation employees should take each year, and whether or not unused vacation days will roll over into subsequent years.
A great vacation policy also promotes work-life balance, as employees can pursue other interests that are as meaningful as their work. This is just one of the benefits that contribute to greater job satisfaction and increased efficiency among employees. As a result, it is now more important than ever to establish a great vacation policy that your employees will love. The good news is, we’re here to show you how.
4 Strategies to Create an Effective Vacation Policy
Make Sure Employees Have Enough PTO to Recharge
Employers are getting rid of their restrictive policies and allowing employees to have more freedom with their time off work. These types of organizations are becoming more prevalent as we move into a world where companies want to attract and retain top talent.
Just take a look at Google. Consistently ranked among the best companies to work for, Google’s employees say the company starts them out with three weeks of paid time off. Later on, they work their way up to five weeks of time off after five years. Employees can also take up to three months of unpaid sabbatical, according to reports on Glassdoor.
Businesses are realizing that it’s important to allow their employees adequate time off to maintain productivity – and you should too.
Clearly define your vacation policy
One of the most important aspects of creating a vacation policy is ensuring that it is fair for all parties involved.
Striking a balance between employer and employee expectations is important. HR must establish a middle ground so that employees can use their time off to achieve work-life balance, and the company can continue running its business smoothly.
To do this, your policy should clearly outline how much leave employees are entitled to, the types of leave available (such as vacation or sick leave), and how PTO is accrued. Be specific about how much notice employees need to give before taking time off, and whether they are required to arrange PTO coverage for their responsibilities while they’re away. It’s also important to include what happens with unused leave at the end of the year—whether it rolls over, is paid out, or expires—so expectations are clear from the start.
Take a different approach
Vacation Sharing Programs have become an essential part of the benefits package for many companies. Traditional vacation dates no longer affect employees, thus businesses must ensure that their workers are able to take time off.
Make time off more flexible by allowing employees to “trade” traditional holidays like Christmas for days off of their choosing. Spotify, the music-streaming giant, recently used this method to respect the ethnic and religious diversity of its workforce.
With fierce competition for talent and the most diverse workforce in decades, company leaders are rethinking how to keep employees happy at the workplace. Car dealerships, law firms, and other businesses usually institute a “vacation sharing” policy, which allows employees to take days off on non-traditional holidays in exchange for another day the employee would ordinarily work.
Set a minimum time-off quota
A minimum time off quota is common among tech companies, where workers are always connected and expected to be available. It’s a great way to signal the company’s trust in employees and help them prioritize their personal lives. This policy will also eliminate employees’ fears of making them seem less dedicated when they request time off. After all, doesn’t each employee have the right to their own vacation time? This also conveys a level of professionalism that is uncommon among smaller groups.
Ultimately, you must establish clear ground rules, regardless of whether you offer your employees regulated paid time off or unlimited time off.
For example, HubSpot’s COO, J.D. Sherman once stated that the company’s vacation policy is “two weeks to infinity.” By setting a flexible and employee-centric standard, Hubspot has shown how empowering employees with sufficient time off can boost productivity.
You gotta learn from the pros, right?
Crafting a PTO policy
Creating a great vacation policy isn’t just about offering time off—it’s about building a framework that supports work-life balance, maintains productivity, and ensures fairness across the board. By clearly defining the number of days off, outlining notice and PTO coverage requirements, you can build a policy that benefits both employees and the company.
Ready for the next step? Try using our leave policy template and start building a vacation policy that works for your team!
Snigdha Gupta
An avid writer and aspiring marketer, Snigdha is a student at Concordia University’s John Molson School of Business.
