Why should employers provide employees with vacations?

Vacation is paid time off that an employer grants to an employee. Although vacation time is a benefit most employees have come to expect, unless state law requires it, employers have no legal obligation to provide pay during a vacation. In fact, employers are not legally obligated to provide vacations at all.

If it's not required, what are the advantages to providing employees with vacations? Although employees may view vacation time as an entitlement, rather than as a benefit the employer provides, a policy on vacation at least as liberal as competitors or local business practice is a valuable recruiting tool. Employers encourage employees to take vacations because employees often return to work refreshed, enthusiastic and alert. Employees enjoy vacations as paid time for planning important occasions, such as weddings, for child care needs, for travel and for accomplishing projects away from work.

Are vacation payments protected by ERISA? Vacation payments by a single employer out of its general assets as a payroll practice do not constitute an employee welfare benefit plan subject to the requirements of ERISA. ERISA would apply (mainly for reporting and disclosure and fiduciary purposes) only if the employer set up a separate fund to pay vacation benefits.

What about state law? While ERISA does not generally protect employees' vacation benefits, state laws may offer some protection to employees and their vacations, particularly as to terms of payment for accrued vacation at termination of employment. Be sure to check State Laws for the law that applies in your state(s).

Why should employers provide employees with vacations? Why should employers provide employees with vacations? Vacation is paid time off that an employer grants to an employee.