Vacation Instead of Annual Increase

shackmorris · January 2004

One of our administrators proposed the possibility of giving employees the option of requesting additional vacation to supplement accrued vacation time instead of a salary increase. Our company considers pay increases companywide on an annual basis which usually averages between 3 and 5%. The administrator thought it would be a great idea if employees had the option to receive additional paid time off instead.

We only have about a handful of employees who reach their maximum vacation accrual. However, we have several that are always running out. Aside from determining how cumbersome this will be to maintain in our H/R and P/R systems, would like any advice and/or comments anyone has before presenting to owner and other administrators.

Any advice appreciated!

marc · January 2004

Just a couple of comments for consideraton. Can your work flow handle having employees off work for longer periods than you currently allow? There is a cost associated with bringing temps in or having the work sit for some extra time, etc.

Let us say the EE selected more vacation for year one. Would that mean that EE would always have that 'extra' time? Because once you get a raise, theoretically, you get paid that extra money every year from then on and all of your future increases are calculated on a higher base. Compounded over time, that would amount to a significant amount of money.

I am probably not being very clear, but I see this as a potential mistake for the EE unless you are going to try to balance out the "penalties" described above. On the other hand, it could be a financial windfall for the company.

shackmorris · January 2004

Your post is pretty clear to me. The "penalties" are of major concern. I've heard through the grapevine that one administrator does not like the idea - probably because most of the employees that run out of vacation every year report to him. This would mean greater costs and more work flow interruptions. I've posed the items you mentioned to our General Counsel for thought. Surprisingly, so far am not getting favorable responses from managers.
I will keep you posted.

Thanks again

Sue · January 2004

We discussed allowing employees to "buy" more vacation time. After much discussion, we designed a Vacation Benefit Option. The program allows employees to take five days of UNPAID vacation time each year. It's simple to administer and employees love it. If you provide your email address, I'll send it to you.

celeste · January 2004

We gave our salaried ee's several options this past year. Increases were going to be lower this year than years past so we felt ee's should be given some choices. Option 1 - 2% increase for average or higher performance. Option 2 - 3% bonus to base. Option 3 - An additional week of vacation. They all realized that choosing bonus or vacation days would affect their future compensation. We still had a mix of choices. Winning choices were #1 Vacation, #2 Bonus, with increase coming in last. We also thought this would be an administrative nightmare but it really wasn't. Our salaried employees receive their vacation renewal on Jan 1 so tracking really wasn't difficult. When the system showed them out of vacation, we just manually tracked the other 5 days. We only have 22 ee's in this group so manual tracking wasn't that much of an issue.

martman99 · January 2004

We have walked away from that particular method of compensating. Is your vacation hour policy to "use it or lose it"? If so, then this may be a greater burden. Also, have you calculated whether this increase in time-off exceeds the 3-5% increase over the course of the new year?

The ONLY time we offer more is at the INITIAL hiring phase. As an incentive we may put the employee ahead of the schedule based upon experience or need. After that they must comply with the requirments of the manual before accruing anymore time off.

Helpful?

Marty

shackmorris · January 2004

Yes very helpful!
Employees are allowed a maximum vacation accrual balance, then our system stops accruing until the EE uses some vacation. If most employees were given an extra week it would average about 2% for most of them. Our accrual system is seniority date based and depending upon how many employees elect the option this will place a burden on us to track. There seem to be a lot of issues we need to consider and everyone's response has helped a great deal. Rarely, we will agree at time of hire that vacation accrual starts right away as opposed to end of orientaion period, also based on our need.

Everyone's response has been helpful and I've presented to our General Counsel.

Thank you

Vacation Instead of Annual Increase

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