Many employers choose to offer vacation pay to their employees to boost morale and loyalty. Depending on the state you work in, there may be laws that apply to vacation pay. Understanding vacation pay can help you offer it to your employees without falling out of compliance.

What is Vacation Pay?

Vacation pay is paid time off (PTO) for vacation reasons. Employers aren’t required to offer vacation pay, but it is a great perk for employees. It can prevent burnout and increase productivity in your employees.

How Does Paid Vacation Time Work?

Since employers aren’t required to offer vacation pay, you have a lot of freedom in how your vacation pay plan will work. You are allowed to determine how employees qualify for vacation time, how much vacation time they can accrue, and if you want to offer vacation pay. Creating a vacation pay policy and making it available to your employees is the best practice when creating a paid vacation time plan.

A common way to set up your vacation pay is to offer days of paid leave based on how long an employee has worked with your company. For example, someone who just joined your company may get 10 days of paid leave in a year whereas someone who has been in the company for 15 years may get 3 weeks of paid leave. You don’t have to follow this structure, and even if you choose to, the amount of paid vacation time you offer is entirely up to you.

Other ways to set up paid time off include accrual and unlimited. Accrued paid vacation time allows employees to earn vacation pay based on the number of hours they work. Unlimited vacation pay is exactly what it sounds like, unlimited days of vacation pay.

Vacation Pay Laws Per State

Depending on the state you work in, you may be unable to include a use-it-or-lose-it policy or may have to payout vacation pay upon termination. Use-it-or-lose-it policies erase accrued vacation pay on a certain date (usually annually). Click the button below to download a guide for vacation pay by state.

FAQs about Vacation Pay

Can an employer deny a vacation pay request?

Yes. Employers are free to deny requests for paid vacation time. Having a written policy in can help employees understand what parameters are used when approving paid leave.

Can employers ask why an employee has requested paid vacation time?

Yes, but employees aren’t obligated to answer their employer.

Can employers require an employee to use their paid vacation time?

Employers can require employees to use their paid vacation time for any reason. This can be helpful if you don’t have hours available for an employee, but don’t want them to go without a paycheck.

Vacation pay is a great benefit to consider offering in your company, but it is not the only type of employee leave to consider. Keep in mind that FMLA or state leave requirements may apply to your company. If you have any questions about vacation pay or related compliance laws, reach out to Helpside at