There is no set holiday pay entitlement for employees in the United States. Other countries do have legislated holiday requirements, but the U.S. Department of Labor considers paid leave to be a private decision between the employer and employee. Many American companies do see the value of holiday pay in terms of morale and long-term staff retention. Among workers in private industry, 77 per cent have some form of paid vacation, according to the US Department of Labor 2010 National Compensation Survey. An employer can use a simple formula for determining the state of an employee's holiday pay liability.
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- Number of annual negotiated vacation days
- Accrual policy
Determine the number of negotiated vacation days. U.S. employers who provide vacation days usually determine an employee's days off by the number of years employed. According to the 2008 Culpepper Benefits Survey, new employees working less than a year average 10 days vacation, employees with five years of service average 15 days and long-term employees with 10 or more years of service average 20 days.
Determine a vacation accrual policy. Some companies allow employees to accrue vacation time and roll over unused vacation days into the following year, while others require employees work a full year to accrue vacation time before taking days off. In some companies, employees can buy more vacation time through a payroll deduction. Others maintain vacation banks to hold unused vacation days donated by employees for the benefit of coworkers with extended medical issues.
Calculate vacation accrual for the length of the employment year. Divide the number of vacation days by the number of weeks in the year. For example, if the negotiated vacation benefit is 15 days (three weeks) per year (52 weeks), then the employee accrues a vacation day at a rate of 0.2885 days for every week worked (15 days / 52 weeks). That calculation will determine pay instead of vacation if the employee doesn't take his accrued days off during the course of the year, or if he leaves prior to using the vacation time earned. The vacation accrual calculation can also serve as a payroll deduction for a departing employee who took more vacation than his work time would have produced.
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