When starting a small business or considering working for one, it is important to consider the average vacation time for small businesses. This average can depend on many factors, but the most common is years of service. Depending on how long an employee has worked for your business often determines the average vacation time.

Although offering paid vacation time to your employees is not required by law, most companies do. According to the Bureau of Labor Statistics (BLS), 76% of private industry workers receive paid vacations. Offering vacation time for small businesses can make your company more competitive and decrease employee turnover. Many small business owners, specifically those who are new employers, struggle to create a vacation policy that is fair and reasonable for their employees. When determining your standard vacation policy, consider the average vacation days per year businesses nationwide provide.

Years of Service

The average vacation time for small businesses depends on an employee’s years of service. The average vacation time is based on how many years an employee works for your small business. The average paid vacation days per year for employees who have been with a business for 1-5 years is ten days. 

Employees who have been with a business for 5-10 years receive an average of 15 days for vacation. The average number of vacation days employees who have worked at a business between 10-20 years receive is 17. Finally, employees who have been at a business for 20 or more years receive an average of 20 vacation days. 

A more detailed breakdown of the average vacation gives the exact percentage:

1-5 Years of Service

• 0-5 paid vacation days (7%)
• 5-9 paid vacation days (38%)
• 10-14 paid vacation days (35%)
• 15-19 paid vacation days (12%)
• 20-24 paid vacation days (7%)
• 24+ paid vacation days (2%)

5-10 Years of Service

• 0-5 paid vacation days (2%)
• 5-9 paid vacation days (9%)
• 10-14 paid vacation days (36%)
• 15-19 paid vacation days (34%)
• 20-24 paid vacation days (12%)
• 24+ paid vacation days (6%)

10-20 Years of Service

• 0-5 paid vacation days (2%)
• 5-9 paid vacation days (7%)
• 10-14 paid vacation days (16%)
• 15-19 paid vacation days (41%)
• 20-24 paid vacation days (22%)
• 24+ paid vacation days (13%)

20+ Years of Service

• 0-5 paid vacation days (2%)
• 5-9 paid vacation days (6%)
• 10-14 paid vacation days (13%)
• 15-19 paid vacation days (20%)
• 20-24 paid vacation days (35%)
• 24+ paid vacation days (25%)

Choosing the Average Vacation Time for Your Small Business

You can use the average number of vacation time when coming up with your standard vacation policy for your small business. You can also use it to guide developing a policy that fits your business. Keep in mind that the average vacation days by industry may vary. In addition, not all industries offer the same number of paid vacation days. 

When creating your vacation policy, you may need to come up with additional rules. Here are a few examples of conditions you might want to establish in your business’ vacation policy:

• Employees must give you a number of days/weeks notice before taking paid vacation
• Employees cannot take off more than a number of days at a time
• No more than a number of employees can take off the same day 
• Employees may cash in a number of unused vacation days for money at the end of the year
• Employees may only carry over a number of days from year-to-year
• Employees must use paid vacation days or lose them at year-end (unless your state bans use-it-or-lose-it policies)

Your small business might choose to lump vacation, sick, and personal days under one paid time off policy. With a paid time off policy, your employees have a fixed number of days they can use for any personal reason. Now, you may wonder if vacation time is the same as paid time off or PTO. 

The best way to think about it is that vacation time is PTO, while PTO is not always vacation time. This means that PTO is an umbrella term for any time an employee takes away from work that your employer pays for. Other forms of PTO include maternity/paternity leave, jury duty, sick leave, holiday pay, or disability leave. Whatever you decide to do, add your policy to your employee handbook.

What About Unlimited Paid Time Off? 

Unlimited PTO is slowly becoming the norm for many companies in an effort to attract top candidates. However, there are both benefits and drawbacks to this type of plan, rather than the types mentioned above. Recent studies show that 72% of employees want flexible time off, and with the current job market, it’s more important than ever for business leaders to listen to their employees on what benefits matter to them. Some companies that currently offer unlimited PTO include Adobe, HubSpot, Netflix, and Density. 

Pros of Unlimited PTO

Companies that have instituted unlimited PTO believe that this flexible policy allows fewer mistakes to be made at work since everyone is as rested as they need to be, which in turn, improves employee morale. Other benefits include establishing an employee-centric workplace culture, aiding in recruitment and retention, and boosting productivity. 

Cons of Unlimited PTO

There are, however, cons in addition to the pros of this policy. Those cons include a fear the employees could abuse the policy, business needs might be compromised, and PTO could no longer be offered as a reward or incentive. When it comes to determining if an unlimited PTO policy is right for your business, you should take into account these pros and cons but also listen to your employees and evaluate their opinions and factor them into your decision. 

Benefits of Employee Vacation Policies

In recent years, vacation policies have become increasingly important for employees. Especially with so many businesses now being remote or hybrid, employees want more time to separate work from their personal lives and be able to step away. The benefits of a vacation policy aren’t just for the employee but also for the employers. Some of the benefits include the following: 

• Boost company culture by showing your employees that you are listening to them, value their time off, and care about their mental health. 
• Help attract high-quality candidates you might otherwise miss out on if you are not offering a favorable policy. 
• Increase productivity by allowing employees time to reboot. 
• Develop great leaders by allowing less experienced employees to step into senior roles while those employees are out of the office. 
• Help develop the skillsets of other team members who don’t have the opportunity to do the work of the out-of-office employee. 
• Avoid balance sheet liabilities if your company allows PTO rollovers. 
• Prevent physical and mental illnesses, which reduces your health care costs.

What about Summer Fridays? 

Summer Fridays are another vacation policy type that provides employees with reduced hours during the summer months on Fridays to give them additional time off that isn’t part of their PTO policy but keeps business operations running smoothly. These days can either be entire days off or half days and are very attractive to current and potential employees. Summer Fridays allow employees to recharge, tend to personal obligations, and disconnect from their work life for a few more hours during the Summer. They also provide better work-life balance, a boost in morale, and make the team more productive when they are working. Summer Fridays aren’t just great for in-office employees. In fact, 69% of remote employees nearing burnout; summer Fridays can help them establish a healthier work-life balance and enjoy their time offline. 

Average Vacation Time for Small Businesses vs Larger Corporations

While larger corporations offer structured vacation policies that are sometimes more comprehensive than small businesses, small businesses offer a more unique and compelling advantage. Small businesses often provide more agility and flexibility that allow employees to take a more personalized approach, which can lead to enhanced employee loyalty and overall retention. Additionally, unlike larger corporations, small businesses can tailor vacation time to individual employee needs, recognizing and accommodating personal circumstances. This personal touch only fosters the relationship between the employer and the employee as well as creates an even stronger foundation of trust and mutual respect. 

Legal Considerations and Requirements for Paid Time Off 

When leadership is developing the organization’s vacation policies, several legal considerations and state-specific requirements must be considered. While federal law in the United States does not require employers to provide paid time off, some states have laws that impact how vacation time is accrued, used, and compensated upon termination of employment. For example, Colorado, Maine, and Montana prohibit using “use-it-or-lost-it” policies, requiring employers to pay out unused vacation days when employees leave the company. When developing your vacation policy, be sure to consider these factors. If you aren’t sure about the regulations in your state and need professional help, contact our team, and we’ll gladly assist you! 

Another thing to remember is the implications of needing a clear vacation policy. An unclear policy can lead to disputes and potential legal challenges later on. To ensure compliance, ensure that you are always aware of the labor laws in your state in addition to the laws noted above. 

Managing Vacation Time for Remote Workers 

As more businesses adapt to remote or hybrid structures, considering how this impacts vacation time is essential. Remote workers often face challenges in disconnecting fully from work, leading to burnout and decreased productivity. To address this, businesses should create clear guidelines and encourage a culture of respect for time away from work regardless of the employee’s location. This includes setting expectations for not working on their time off, creating plans for co-workers to handle any necessary work, and establishing an environment where taking time off is seen as essential and a positive thing for mental well-being and not as a sign of an employee being less committed to the work. If employers are worried that remote employees are not feeling as if they can take time off since they are working from home, periodic check-ins can be helpful. 

Addressing Burnout and Mental Health

As noted above, with more flexible working arrangements and technology, workers are working longer hours, and burnout is present across industries. Small businesses have the opportunity to play a proactive role in encouraging employees to take advantage of their vacation time. Steps to achieving this include creating an open dialogue about the importance of rest and recovery and actively promoting a culture where time off is respected. Leaders can also lead by example, taking their own time off. 

Mental health days are also increasing in popularity as a complement to vacation policies, highlighting the dedication to employee well-being. These days can be used at the employee’s discretion and are similar to a sick day rather than coming out of their allotted vacation time. Together, these efforts create an environment where employees do not feel they need to work when they are sick to save time for a vacation, feel supported in their health and wellness, and can eliminate the guilt associated for many with stepping away from work, all of which lead to increased productivity and employee satisfaction. 

Create Your Vacation Policy with Canal HR

You don’t have to create your employee vacation policy benefits alone. At Canal HR, we work with you to equip your small business with an overall benefits package that suits all your employees. There are many intricate details that come with providing different employee benefits—and benefits in general. If you want to provide your employees with fair and reasonable vacation days without the hassle, contact us today to schedule a free consultation.