How to Handle Employee Vacation Policies

Employee Vacation Policies

Employers face many decisions when structuring their business’ policies and procedures. These can range from dispute resolution to performance tracking, but prominent among these are policies about the accrual and use of paid vacation time. Per N.C.G.S.A. § 95-25.12, no employer is obligated to provide paid vacation, but for obvious reasons, it is a hot topic in employee recruitment and retention.

The difficulty employers can find themselves in after deciding on a vacation policy is in ensuring that they have been thorough enough to cover all of their bases.  The series of guiding statutes, N.C.G.S. §§ 95-25.2(16), 95-25.12, and 95-25.13, require that employers who offer paid vacation leave to:

  • Remain compliant with their policies, should they adopt any;
  • Present and notify employees about this policy at the time of hire;
  • Make the policies available through a posted notice or in writing; and
  • If changes in the policy are going to take effect, employees must be warned in writing at least one pay period in advance of the changes taking place. Although, vacation benefits can be retroactively increased without the required advance notice.

These alone are not the full obligation either, on top of properly informing employees about the policy and sticking to it, employers must craft their policy to meet certain guidelines dictated by the administrative code (13 NCAC 12.0306). These include:

  • How and when vacation is earned so that the employees know the amount of vacation to which they are entitled;
  • Whether or not vacation time may be carried forward from one year to another, and if so, in what amount;
  •  When vacation time must be taken;
  • When and if vacation pay may be paid in lieu of time off; and
  • Under what conditions vacation pay will be forfeited upon discontinuation of employment for any reason.

Failure to make these points clear can result in some serious frustration for employers as vague or ambiguous policies are interpreted against the employer to favor the employee under the direction of the code. Even something as simple as an earning period needs to be explained in detail, as a correction or revision will only impact vacation pay moving forward, any accrual before will be interpreted in the way most beneficial to the employee.

While the State of North Carolina generally provides employers a lot of latitude in how they chose to handle employee vacation pay, they do require that these policies be thoughtfully constructed and thoroughly followed. For more in-depth information or specific questions, please contact our office.

Revolution Law Group is located in Greensboro, NC, and serves individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit or call 336-333-7907.

The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.