Vacation pay is a typical employee benefit throughout the United States. In New York, however, like most states, employers do not have to give their employees paid vacation. Consequently, New York employers have discretion in how they structure their vacation benefits. But once they establish a vacation plan, employers must follow it.

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New York Vacation Pay Law

Again, New York law does not require employers to give their employees vacation time. However, employers who offer paid vacation must notify employees of the applicable policy in writing.

Employers must follow their existing vacation pay policy. If, for example, the policy says that employees will receive unused vacation pay upon separation of employment, then the employer cannot withhold the vacation pay by arguing the employee engaged in misconduct. However, if the policy specifies that unused vacation time is forfeited upon termination, then employees do not have a right to a vacation payout. If the employer’s policy does not address separation of employment, or there is no written policy, then the Department of Labor will take the position that the employee is entitled to a payout of earned vacation time.

Generally, employers may revise their vacation pay policies. In doing so, employers should avoid taking away earned vacation time without adequate compensation.

Employees may also receive contractual rights to vacation pay through individual employment agreements or collective bargaining agreements. Employers may not be able to modify these easily.

Structuring Vacation Benefits

Employers take different approaches to paid vacation.

Some companies allow different numbers of weeks of vacation pay based on length of service. This often ranges from approximately one to four weeks per year. Eligibility may also vary between full- and part-time employees.

Some companies combine vacation and other forms of paid leave into one category—PTO, or paid time off. Employees receive a specified number of PTO days (or hours) to cover absences. This may include or be separate from sick leave.

There are also different accrual methods. Sometimes employees receive all of their annual allotment on the first day of the year. Under other systems, employees accrue vacation pay on a daily, weekly, monthly, or another basis.

Most employers require supervisor approval, ideally with reasonable notice by the employee. This helps avoid too many employees being on vacation at the same time.

Different methods work for different organizations. There is no one-size-fits-all “best” approach. This is one area where employment law, at least in New York, allows employers considerable flexibility to meet business needs.

Check Your Vacation Policy

Take this opportunity to review your organization’s vacation pay policy. Does it still meet your needs? Does it address what happens to vacation time when employment ends?

A well-designed vacation policy can improve employee morale while maintaining productivity. A weak policy can lead to workforce shortages or fatigued employees. Consider many factors, including past experience. If the current vacation pay policy isn’t producing the desired balance, then changes may be appropriate.

Experienced employment attorneys can assist in policy design. They can both offer alternatives that have worked in other organizations and edit policy language to help avoid unintended consequences.