How Do You Design a Vacation Policy for SMEs?

When crafting a vacation policy, HR managers and executives often draw from past experiences, sometimes without considering the specific needs of their current company. It's crucial to outline clear guidelines tailored to your organization's culture and operational demands. A well-designed vacation policy not only shapes employee experiences but also plays a pivotal role in effective employee management and retention strategies.

After reviewing numerous vacation policies across companies, it's evident that many HR managers adhere strictly to unwritten norms and undefined clauses, often perceived as industry standards, to craft their vacation policies. However, it's crucial to recognize that what works for one organization may not be suitable for another. Each company should customize its policies based on its unique requirements and operational dynamics, emphasizing clear documentation management to ensure policies are both effective and compliant.

Factors you need to consider when developing your vacation policy include:
• Size of the company
• Type of business
• Culture

Size of the company

What works in a large company does not apply to a start-up and vice versa. Startups that have fewer than 20 employees tend to be very close-knit, and there is strong cohesion among team members, and all team members are independently responsible for their work. Most employees behave responsibly when it comes to taking vacation, and it is more visible to the entire company when someone is absent from their duties more often. It is therefore helpful if the vacation policy is as simple as possible. Most startups around the world use an unlimited paid vacation policy and do not have other types of leave such as sick or personal leave. This makes things very easy for the employees and is also very beneficial for the start-up from a business perspective. With an unlimited vacation policy, there are typically no carryover balances or remaining vacation funds, allowing the startup to save on this additional burden.

As your company grows in size and cash flow improves, you can introduce more types of leave to meet employee needs and also introduce restrictions to prevent abuse. Find out about the various holiday policy restrictions possible with leave Management here.

Business goals

The design of a vacation policy in a company should be based on the type of company and the company's goals. Therefore, this is a joint effort between management and HR. As we always suggest, it is essential for today's generation HR teams to understand the core business of the company and participate in the business objectives. Only then will HR policy and decisions remain relevant and fruitful for the company.

If you are an offshore IT services company where employee availability depends on commitments to customers, you may want to design your policies to limit frequent and very long-term absences while still meeting your employees' vacation needs. You can design your policy so that an employee cannot take more than 2 consecutive vacation days in a week. If it's a support role where employee For a sales team operating in the Indian B2B market, companies can encourage them to take vacation during festive seasons like Dussehra and Diwali when sales activity is low. A sales team operating in the B2C or retail market, on the other hand, will want to ensure that all of their sales reps are fully available during peak seasons. You could design your vacation policy to ensure their availability.

In case you're wondering, here's the explanation. IceHrm Leave Management System includes features and tools to help you manage employee leave requests efficiently. IceHrm will automate leave calculations for you to eliminate errors and increase accuracy. We've even claimed that IceHrm is the most comprehensive and best leave management system in the world and we haven't been challenged yet!

If you are a retail business that requires employees to be available on Saturdays and Sundays, you could set weekly days off to Wednesday or Thursday and even impose a hefty penalty for no-shows on Saturday or Sunday when business is at its peak due to customer traffic reached.

One size does not fit all

Regardless of whether it is a start-up or a mature company, not all employees have the same task. The sales team may have different work requirements than a programmer. Therefore, it is important to understand that there is no one size fits all when it comes to vacation policies - one vacation policy is not suitable for every role. The HR policy writer must work with each department or function of the company and design various vacation policies accordingly.

As an example, let's take the case of an offshore software development company whose sales team works in the US time zone. Most sales activity in the US market comes to a halt during the US holiday season in December. Most clients will not be available to answer calls and no new contracts or budgets will be signed during this time. So the sales team doesn't have much to do during this time. Therefore, it is better to develop a vacation policy that encourages the sales team to use up all vacation days at the end of the year. You could design your vacation plan for the US sales team so that the vacation does not roll over to the next calendar year.

Culture and employee friendliness

While it is important that your vacation policies align with your company goals, it is also important that you consider employee experiences when designing your vacation policies. A company with too many restrictions in its vacation policies can frustrate its employees, and this frustration will eventually build up and leave a poor impression of HR as a function. We see some HR departments acting like a police force with irrelevant and complex vacation policies that neither serve the business purpose nor help employees. People in today's generation no longer want to be part of such a human resources department!

Statutory vacation days

Regardless of the size or type of company, it is important to understand that every company must respect and comply with the statutory vacation regulations required by law. Statutory vacation days exist for a reason, and any company that cares about their employees will find that it is in their best interest to offer these statutory vacation days to show employees that they care. Regardless, these are required by law and companies cannot refuse to offer statutory leave such as maternity, paternity and bereavement.

Ensure leave policy is available when it is needed and where it is needed

Many companies draft very robust and comprehensive vacation policies, only to find that most employees have never read them or even opened the document. In 99% of cases, the vacation policy is a Word or PDF document sent to employees in an email or as a link in an email in some corner of the intranet portal or in most cases in a shared file is provided. In a busy work environment, it gets lost and falls into a black hole of time, and most employees can't even remember it ever existed.

If an employee then requests leave only to discover that they cannot request privileged leave due to restrictions they did not know existed, that is very unpleasant. This leads to dissatisfaction.

A good HR Software like IceHrm takes care of this issue very well and add various types of leave types to match your leave policy. When defining a leave type, you can either let your employee apply for it or your admin assign leave requests for employees, or even both. When an employee applies wants to apply for a time off request , the employee should select the leave type, and number of days and then submit their leave request.