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Is Your Vacation Policy in Your Company’s Best Interest?

December 12, 2017
Workforce Planning
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Approaching a new year is a good time to think about our business practices and evaluate whether they’re still meeting our needs. Changes happened over the past year. Maybe it was to your product line, your pricing structure, or even a merger or acquisition. Changes aren’t always expected or welcome; but in business, it’s our responsibility to move on.Whether the magnitude of the changes that occurred this past year are minor or significant, there will always be debates over whether to go in one direction or another. Should you expand your product line or expand your reach? Invest in specialized software or a product awareness campaign? Sometimes the only commonality between choices is that each requires resources but they’re mutually exclusive.

Holiday Staffing

A perpetual resource constraint that many of us face each year-end is managing an even leaner staff than normal. Vacation and leave policies often include limiting or restricting leave days from rolling over into the new year. It’s a quandary no matter what department you manage or what business you’re in. Even if you’ve managed to have your team spread out their vacation time throughout the year, you’re likely going to encounter others within your company and beyond who didn’t take that same approach.

Use It or Lose It

Is the practice of having paid leave time expire at year end an outdated one? Some states like California and Montana outright ban the practice. Most others leave it up to you.With our low unemployment rate in the U.S. and the fight for talent at a premium, it seems that employees have the upper hand in this one. Should they call the shots? I don’t mean to put management and staff at opposites, I’m just pointing out the complex nature of a problem that happens annually as we hit the last month of the year; being somewhat forced to grant vacation days regardless of the business need for steady coverage over the holidays.

Why Do It?

When the company policy demands put managers in a bind at year end, it’s needs to be evaluated. Is expiring vacation days the best way to go? Obviously, we know employees need to take breaks from their work. And from a fiduciary standpoint, we need to ensure that employees go on leave so that their work can be evaluated by others, even if it’s only for few days stretch.Continually accruing vacation days for years isn’t the best solution either. Mechanically, we can do the math and allocate the funds toward eventual payout but here again, managers can be put in a bind with requests for extended leave, perhaps when their departments need the staff most.

Evaluate Options

While neither a use-it-or-lose-it policy or a you-never-lose-it policy is optimal, there is some middle ground for us to consider…and even an off-the-chart option.

  • Caps on Carryovers - Allowing some types of leave to carry-over into the next year - up to a specified number of days - is something many of us choose to utilize. If your FP&A expert, Mary, has three weeks of accrued vacation time at the end of November, your policy might be to allow her to carry 5 vacation days into 2018, with the other days she could either head to Tahiti for 2-week vacation or lose it if it’s not planned and approved.
  • PTO - Combining vacation, personal, sick and potentially holiday leave into one bank of days as paid time off days (PTO) can help with managing the days in the employee’s time bank. Implementing PTO days saves managers time by alleviating them of questioning employees and recording why they’re requesting days off. It’s not just a psychological lift of stepping back from getting too personal, it also provides just one category of time to account for and eliminates the situations where some employees use up every ounce of sick days while others resent them for not being there when the chips are down.
  • Unlimited Vacation - This concept is still foreign to most of us but there are some mavericks out there who have dipped into this realm. Staff managing their own needs sounds great, but embedded with it are some complexities that must be carefully understood. Shift work, customer-centric businesses, and documenting regulatory compliance with FMLA and other statutes each can complicate, endanger, or prevent a successful implementation of unlimited vacation time.

Year-end Evaluations

The work of managing end-of-year policies and concerns is tricky but that doesn’t let us off the hook from our obligation to explore and question our HR policies. Making sure that our practices, HR and otherwise, are addressing our current and future business needs, are in tune with our company culture, and financially fair to both the employees and the organization, is exactly why we’re in place as financial managers. They’re also elements that help keep our work diversified and interesting. I wouldn’t want it any other way.Are your company’s HR leave policies optimal for your business today?

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