Most employees expect some kind of paid time off. Full-time employees need vacation and sick time, and the occasional personal day. If you aren’t giving any kind of paid time off, chances are high that you’re losing top talent to competitors who are. However, paid time off can be expensive, especially for small businesses. The best thing you can do is consider a strategy that fits the needs of your business.

Know the Law

First and foremost, you need to know the law pertaining to paid time off, both at the federal and state levels and, in some rare cases, the local level. The Department of Labor at both the state and federal level often provide all the regulations in one place. The Society for Human Resources Management is a membership organization that provides resources for businesses, including a legal issues section of their website. This can help guide you as your craft your policy.


One important part of the following the law is consistency. If you do not apply your policy consistently, you open yourself out to lawsuits and charges of discrimination. Further, you might have to pay steep fines to the state and federal labor boards. Putting it in writing is always a good idea, both for legal reasons and practical reasons. You’ll deal with far fewer misunderstandings and problems when the olicy is in writing and available for everyone to see.

A General Strategy

There are a number of steps you should go through when developing a paid time off policy for your business:

  • Ask yourself what your company can reasonably afford to offer. Perhaps it’s a bulk number of days off that includes both sick time and vacation time. Maybe you can keep these separate.
  • How does your business work? Does it make sense to shut down for two weeks out of the year?
  • Consider bringing in a third-party consultant to help you craft the best policy for your company.

Going through these steps can help you to craft the best policy for your business.

Stratified Time Off

Many companies stratify time off in the same way that they stratify pay. People with more experience at the company get more vacation time during the course of a year. Conversely, your new hires will see less vacation time until they’ve put in some time with your company. This is a way to make paid time off available, but also to keep the costs of that paid time off down. This can increase annually or it cane increase when people have reached milestones or service, such as an increase every five years or so.

Getting a Plan in Place

You need to get a plan in place, but make sure that you treat the development of a paid time off plan with the care that it deserves. Once you have this in place, you will find that it pays dividends in terms of being able to recruit and retain the top talent in your field. As recruitment and retention is always difficult for business, your ability to do this will put you in a more competitive position.

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