What is Vacation Pay?

Vacation pay is money that is paid to employees when they take off from work for a vacation. Some businesses offer vacation pay as a benefit to help in attracting prospective employees. This is especially true in competitive industries where talent is at a premium. In some companies, vacation pay can also be an incentive to stay on for a long period of time, because those companies might increase the quantity of vacation days with greater seniority.

For some companies, vacation pay is part of a whole bundle of days prescribed as "paid time off" (PTO). How to use these days is up to the employee, and this would include days when the person is sick or if they want to take a vacation. There are advantages and disadvantages to this approach. Employees like it because they will generally end up with more overall time off due to the ability to lump sick days in with their vacation time. Some employers don’t like it for the same reason.

In some companies, it is important for employees to make use of all vacation days. They may not roll over from one year to another, and if employees don’t use them, they may end up losing them forever. This is also true in the case of losing a job. When people quit or get fired from a job, employers aren’t necessarily required to pay them back for their accrued vacation days, and that money might be gone permanently. The rules about these kinds of things will generally depend on the contract signed when a person begins working.

There are many businesses that simply don’t offer vacation days. This is usually because the kind of labor needed for the workforce is very easy to come by. If the labor isn’t in high demand, there is no real incentive for employers to give laborers any benefits. Examples of jobs that often don’t offer vacation days would be low-wage factory jobs and low-end jobs in the service industry. As a general rule, the more education required for a job, the better the chance for good benefits.

Sometimes vacation pay will increase as a person works longer at a given business. Therefore, a person may start with one week of vacation pay during their first year, but end up with three weeks' worth after 15 years. These kinds of increases are also often applied as a person works her way up through the business's command hierarchy. Managers will also generally get more vacation pay than other employees.