Vacation and Sick Leave Policies for Your Small Business

Brad Dorsey

2 min read ·


Employees of a small business are covered by both federal and state employment laws. Offering workers paid vacation time, paid sick leave, or paid holidays is not legally required by the Fair Labor Standards Act, which is the primary federal law governing employment. However, if you want your business to be competitive with bigger companies that do offer some type of vacation and sick leave, you will need to develop a policy.

Vacation Time

Most U.S. employers offer employees paid time off for:

  • New Year's Day
  • Memorial Day
  • Independence Day
  • Labor Day
  • Thanksgiving Day
  • Christmas Day

Most companies also allow employees to take unpaid days off, or use paid vacation time, to cover religious holidays. You may also want to provide some sort of bereavement leave, whether paid or unpaid, if an employee experiences a death in the immediate family.

A typical vacation policy includes one to two weeks of paid vacation time per calendar year. You may want to set rules such as requiring employees to work for your company for one year before they accrue any vacation time, or giving employees a certain number of paid hours off per month (for instance, 8 hours per month) after they have passed their initial probationary period. At most companies, employees who pass milestones get more vacation — for instance, after five years with the company, employees may get three weeks of paid vacation.

Sick Leave

A typical sick day policy includes five or six days of paid sick leave. Some companies use the concept of "personal days" instead, giving employees the same number of paid days off, but allowing them to use the days for other things besides illness.

If you balk at the idea of paying employees for sick leave, consider the trade-off. Employees who have to take unpaid time off when they are ill will be more likely to come in to work when they are sick. If their jobs involve lots of customer contact — such as retail sales, or food service and preparation — this could put your business at risk from disgruntled customers or even lawsuits.

The Family and Medical Leave Act is a federal law that requires employers to give employees as much as 12 weeks of unpaid time off to deal with the birth or adoption of a child, a serious medical condition, or a serious medical condition of an immediate family member. Different states have set different rules as to which businesses are affected by the FMLA, so consult your state's labor department.

Also, keep in mind that federal law requires employers to give employees unpaid time off for jury duty, military service, and voting.

The U.S. Department of Labor website has more information on laws regarding vacation and sick leave. For laws in your state, contact your state labor office.

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Brad Dorsey