ComplianceLegalJanuary 09, 2021

Optional time-off benefits you can give your employees

Employers may choose to provide certain time-off benefits to their employees, including holidays, vacations, sick leave, personal leave and funeral leave.

An important part of just about any compensation package are the time-off benefits employers have the option of providing to their employees. Mandated time-off is limited but the optional time-off you can offer your employees is much more varied and includes holidays, vacations, sick leave, personal leave, and bereavement leave. These types of time-off benefits can be a very valuable part of your employee benefit package.

Time-off for holidays

You may be surprised to learn that you aren't legally required to give your employees days off for federal or state holidays. In fact, if you need to, you can require that they work on Christmas Day, Thanksgiving Day, or any other traditional holiday. However, many employers do have specified holidays when employees do not have to work.

If you're in a business that must deal with other businesses that observe the holiday, it may be better to give the employee the holiday off. If they have to do a lot of interacting with other businesses that will be closed, they won't get much done anyway. On the other hand, if you have a business that might do big business on a holiday, such as a store or a restaurant, you may want to stay open and pay the employees who do work time and a half or double time, as is often the custom.

Personal reasons may be the reason behind the granting of holiday time-off to your employees. You may want the day off to spend with your family or pursue some recreational activities. If you're going to be out, you may just want to close the business for the holiday. If you use this approach, be sure to give employees enough time to plan for their holiday and try to be consistent in the holidays that you take off. If you take a holiday off one year but not the next, employees (and customers) won't know how to plan for their holiday.

Paying employees for holidays. If you don't want to pay employees for the holiday, chances are most employees won't take the time anyway, unless it is a religious holiday or unless you allow them to use a vacation day (if you offer paid vacation benefits). Most employees won't take a day off if they won't get paid for it. However, having to work on a day when almost all other businesses are closed is sure to cause some resentment on the part of your employees. Remember — time off is a valuable commodity to most workers.

Tools to use

A sample holiday policy is included in the Business Tools.

Keep in mind that paid time off for holidays is that the payments cannot be credited toward meeting the minimum wage requirements for any given pay period.

The average number of paid holidays for full-time employees is 9.3. Virtually all companies provide the following as paid holidays:

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

And they frequently add others from the following list:

  • Washington's Birthday or President's Day
  • Good Friday
  • Dr. Martin Luther King, Jr. Day
  • Veterans’ Day
  • Columbus Day
  • the Friday after Thanksgiving
  • Christmas Eve
  • New Year's Eve

Some businesses add still other days, such as a floating day, election day, or the employee's birthday.

State holidays. Some businesses also have state holidays that they observe. Consult our state map to get a list of official state holidays in your state.

Handling time-off for religious holidays. Dealing with religious holidays can be tricky. You may be subject to anti-discrimination laws prohibiting you from discriminating against employees on the basis of religion, and religious holidays can produce some problems for you in providing time off for religious reasons. The basic rule is that an employer's failure or refusal to accommodate the religious needs of employees becomes religious discrimination if the employer could make such accommodation without undue hardship to the owner's business.

What should you do if confronting with this issue? Here are some options you may want to consider:

  • Allow individuals to use vacation (or a floating day off to be taken at the employee's discretion) or other eligible leave pay when observing their religious holidays.
  • Grant religious holidays (other than those previously designated as holidays) without pay as an excused absence.
  • Allow employees to take religious holidays and then make up the time.

What vacation time should you give your employees?

Although you are not legally required to offer paid vacation benefits to your employees, most full-time employees will expect to get them. However, vacations are a particularly delicate subject for small businesses. If you have two employees, and one goes on vacation, you've lost a third of your workforce! Therefore, planning and coordination are critical should you decide to offer vacation benefits.

Various considerations are involved in granting vacation benefits to your employees:

  • How much vacation time-off? How much vacation you decide to give employees is really up to you. Most employers link the length of time that an employee has worked for them to the amount of vacation. You might offer 10 days after one year of service and increase that number by one vacation day for every year of service after that (up to a certain limit), so that at milestones of service such as five years and 10 years, employees would, in effect, be getting an additional week of vacation.
  • Time-off day by day or all at once? Because small employers are more affected by vacationing employees, you'll need to decide which arrangement for using vacation is best for your business. Requiring employees to take all their vacation at one time or in minimum increments, such as five days at a time, allows you to plan better. You'll know that the employee will be out for a certain amount of time and you may be able to schedule the vacation for a time when business is slow.


Peter is the owner of a handmade basket business and gives his employees two weeks of vacation per year but makes them take the second week of the year as one of their weeks. Employees are free to use the other week at any time, subject to approval. Because Peter's business is largely seasonal, he can afford to shut down the entire business for a whole week the second week of January.

  • However, allowing employees to take a vacation day here and there without minimum increment requirements allows your employees to take vacation more spontaneously. Advantages to this arrangement are that employees may not take such long vacations, which may mean less interruption in your business. Keep in mind that there are payroll concerns that you should be aware of if you permit employees to take day-at-a-time vacations.
  • Administrative vacation time-off issues. Some time-off plans can be covered under a federal law known as ERISA, which has rigorous administrative requirements. You can generally avoid these if you make time-off plans more of a payroll practice than a separate plan.


A determination of whether a vacation plan is an ERISA plan or not depends on how the program is structured (i.e., how employees are paid). If the vacation policy is an organized “plan” where a separate check would be issued for vacation time, it is an ERISA plan. However, if the vacation plan is just a payroll practice, and employees are paid out of the employer's general assets, it is not an ERISA plan.

Whatever vacation benefits you choose to offer, it's best to have a written policy that explains your vacation usage, accrual, and notice policies so that employees can plan most effectively.

Vacation policies

To keep your business running smoothly, you'll need to know in advance when employees are planning to take time off for a vacation. In explaining your vacation scheduling policy to employees, you should specify:

  • how the request is made (written/orally)
  • to whom the request is made
  • how far in advance a request must be made
  • if there is a chance that employees might not get the vacation time they request

If your business's peak times occur such that during certain times of the year employees are not permitted to take vacations, those restrictions should also be conveyed ahead of time, so employees can plan for it.

Tools to Use

The Business Tools include a sample vacation policy that you can edit to suit your needs.

You can choose to offer employees sick and personal leave

Generally, paid sick leave benefits and personal time-off are not required by law. Unpaid “sick” leave, however, may be legally required if you are subject to either federal or state family and medical leave laws. However, sick and personal leave, like other time-off benefits, is valuable to employees and, when combined with certain disability insurance benefits, can create an attractive package of benefits that make employees feel secure and valued.


Beginning in 2012, under Connecticut state law, employers of 50 or more must provide certain service employees with paid sick leave which accrues at one hour of leave per 40 hours worked.

Sick leave

If you do decide to give your employees paid sick time, generally the amount of time-off you offer is entirely up to you. Most businesses that offer a sick leave plan establish a set limit on the amount of time for which an employee can be compensated. The number of days can:

  • depend on the circumstances, at your discretion (though such discretion should be fairly applied to avoid charges of unfair discrimination)
  • be a fixed, predetermined amount, such as ten days each calendar year
  • be based upon the length of service of the employee

Setting up a sick leave policy. If you decide to offer paid sick leave, you might want to have a written policy to explain the procedures and limits of the policy. Some points to include in your policy are:

  • how the sick leave program coordinates with your short-term disability policy, if you have one
  • what constitutes a sickness
  • whether the policy extends to a child's or spouse's illness
  • whom an employee should contact in the case of sickness
  • whether employees can accrue and carry over unused sick days from one year to the next

Tools to use

A sample sick leave policy is included in the Business Tools.

Personal time-off

Another time-off benefit that employers can offer is personal time. Personal time is offered to employees to cover situations that are not included in sick leave, bereavement, or other policies. Some examples of situations that might qualify for personal time off are house closings or car breakdowns. Personal time is generally different from vacation or sick leave in that:

  • usually only a few days are offered each year
  • the number of personal days offered is the same for each employee and does not increase with years of service
  • the personal time is given on a “use-it-or-lose-it” basis — employees cannot accrue and carry over personal time

In larger corporations, personal time is usually treated as paid time off, but you may choose not to pay your employees. Instead, you may decide to treat it as an excused absence.

Personal leaves granted on an ad hoc basis to particularly valuable employees are more common, but if you choose to give personal leave in this fashion, be careful to apply the criteria you use to give personal leave equally, fairly, and consistently among all employees.

Tools to use

A sample personal leave policy is included in the Business Tools.

Funeral leave

There are no laws requiring you to provide employees with funeral, or bereavement, leave. The employers that do provide the leave usually allow between two and four days per funeral.

If you decide to specifically offer funeral leave, as with all leaves, you may want to have a written policy that will explain the parameters of the program to employees.

Tools to use

A sample funeral leave policy is included in the Business Tools.

Employers that don't provide funeral leave generally allow employees to use some other form of paid leave, such as sick days or vacation. As a practical matter, when a death occurs in an employee's immediate family it's unrealistic to expect him or her to work, and you'll be perceived as hardhearted if you don't grant some paid time off.

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Mike Enright
Operations Manager
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