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.

Did You Know?

According to the Bureau of Labor Statistics, seven out of eight small businesses (employers with fewer than 100 employees) provide paid vacation to their employees.

How much vacation? How much vacation you decide to give employees is also 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.

"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.


The owner of a small air conditioning distributorship gives his employees two weeks per year but makes them take the last week of the year as one of their weeks. They are free to use the other week at any time, subject to approval. Because his business is largely seasonal, he can afford to shut down the entire business for a whole week between Christmas and New Year's Day.

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.