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Vacation and Sick Leave

Federal law does not mandate paid vacation or sick leave for private employers. Your state law may require small-business owners to offer workers vacation time and sick leave. Many employers provide these benefits to full-time employees as a way to keep employees and provide job satisfaction.

Employers may offer them as hiring incentives and perks if the law does not require vacation and sick leave. An employee handbook outlining your policies helps avoid possible legal action. You should get legal advice about the implications of such benefits.

This article summarizes the laws about employee benefits like paid vacations and sick leave.

See FindLaw's Leave Laws and Wages and Benefits sections to learn more.

Paid Vacation

Paid vacation days are every employee's dream benefit. Full-time and part-time employees alike hope for a job with a two-week paid vacation like their grandparents once had. That rarely happens. Today, employers usually offer accrued paid time off, with employees getting a certain number of hours for an amount of time worked.

Whatever method you use to provide vacation time, keep a few things in mind:

  • Consistent Accrual Standards for Each Employee: The accrual rate should be the same for all workers, regardless of classification or status. This helps prevent discrimination claims.
  • Determine Your Carry-Over Policy: Some employers allow vacation hours to carry over from one year to the next year. Others have a "use it or lose it" policy. Employees must use accrued time in each calendar year. Whatever method you use, state it clearly in your company policy or handbook.
  • Know Your State Law: States may not mandate vacation benefits, but there may be regulations when employers offer them. There may be laws about accumulating time, employee classification, and when workers can take time off.

In some states, vacation pay is a form of wages. You must deduct taxes from vacation pay accordingly. Depending on the employer's plan, vacation time may accumulate daily or weekly. Employers must pay unused vacation time to the employee upon termination of employment.

Paid Sick Leave

At present, there are no federal paid sick leave laws. At this time (2024), 22 states and the District of Columbia have laws requiring at least some employers to provide paid sick time. Twenty-two cities and counties (some within those states) have separate laws. If providing sick leave, an employer should:

  • Describe Sick Leave Requirements in the Employee Handbook: You can request a doctor's note from the employee but must include this term in the handbook.
  • Decide Whether To Pay Accrued Pay When Employee Leaves Employment: Check your state laws and confirm if you must include accrued sick pay with other wages.
  • Have a Carry-Over Policy: As with your vacation policy, your sick leave policy should state whether it carries over from year to year or is a "use it or lose it" policy.

Unpaid Leave

The federal Family and Medical Leave Act (FMLA) allows qualified employees to take up to 12 weeks of unpaid leave in any 12-month period. An employee may use FMLA leave:

  • To care for an infant or adopted child
  • To care for a family member with a serious injury or illness
  • To recover from the worker's own serious mental or physical condition

Workers can take unpaid time in increments or as an adjunct to other medical leave, paid time off, or workers' comp time.

Workers' compensation insurance is not an employee benefit, but like sick pay, it provides paid time off when an employee needs to recover from an injury or illness. Like the FMLA, employees must return to the same position when their leave ends. Vacation time and sick time can overlap with workers' comp time.

States may provide additional benefits through their own family and medical leave laws.

Paid Time Off

Some businesses have combined sick leave and vacation time into a system called paid time off (PTO). Employees receive a certain number of days for vacation, sick leave, and personal time. For example, if a company grants 10 days of vacation, five sick days, and two personal days, the employee would have 17 days of paid time off.

Companies use this method to prevent abuse of sick time. It provides employees with the flexibility to take time off when desired. With a PTO policy, the employer must pay the employee for unused paid time off, such as vacation, sick leave, and personal days.

Get Legal Help With Your Vacation and Sick Leave Questions

Paid leave is a good way to attract new employees and retain existing workers. If you offer sick leave or paid vacation, you should ensure you comply with state and local laws. Contact an employment law attorney in your area for legal advice about your leave policies.

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