Small Business Tips

Time Off Policies for Small Business - A Comprehensive Guide

Hannah Rau
January 16, 2024
min read

As a business owner, you've likely encountered the question from your employees: "How much time off do I get?" Especially as a new business, this question can be confusing. The distinctions between paid and unpaid time off requirements add another layer of complexity to this question. 

To provide clarity, we've gathered the main types of time off, highlighting their benefits. While some types are options, others are required to offer to your employees. 

Dive deeper into the details below to find the answers about time off policies and make informed decisions for your business.

Time off Policy Types

A time off policy, also known as a leave policy, is a structured set of guidelines and rules established by an employer to manage various types of employee absences from work. This policy outlines the procedures, eligibility criteria, and expectations regarding time off, including vacations, sick leave, personal days, and other types of leave.


Identifying a vacation days policy requires thoughtful consideration, especially given that federal law doesn't mandate vacation pay. The Fair Labor Standards Act (FLSA) doesn't require payment for time not worked, encompassing vacation, sick days, and holidays. 

According to the Bureau of Labor Statistics, the average number of paid vacation days tends to increase with experience:

  • 11 days for employees with one year of experience
  • 15 days for employees with five years of experience
  • 17 days for employees with ten years of experience
  • 20 days for employees with 20 years of experience

Deciding to provide paid vacation days is one step; the next involves structuring the benefit. Some organizations reset vacation days annually, while others let employees accrue them gradually, earning a specific number of hours per pay period. Additionally, the approach to rollover days varies; some companies enforce a "use it or lose it" policy, while others allow accrued days to carry over into the next calendar year within specified limits.

Sick days

Addressing sick leave for employees is crucial as their well-being directly impacts performance and office health. Similar to vacation days, the allocation of sick days often correlates with years of service. According to the U.S. Department of Labor, the averages are as follows:

  • 7 days for 1 to 5 years of service
  • 8 days for 5 to 10 years of service
  • 9 days for 20 years of service

Determining the appropriate number of sick days for your employees can be challenging as a small business owner. Many employers opt for paid sick leave to discourage unwell employees from coming to work, contributing to a healthier work environment. For exempt employees under the Fair Labor Standards Act (FLSA), understanding the legal requirements and seeking guidance can be beneficial when formulating a sick leave policy.

It's important to understand state and local sick leave requirements that may influence the design of this benefit. 

Here are the states that have their own paid sick leave requirements:

Some employers also allow sick days to be used as mental health days. The World Health Organization's acknowledgment of burnout as a legitimate diagnosis underscores the importance of providing employees with the flexibility to take a step back and recharge, contributing to a more sustainable and supportive workplace.

The Family and Medical Leave Act

The Family and Medical Leave Act (FMLA) plays a crucial role in employee benefits, extending sick days. As defined by the U.S. Department of Labor, the FMLA provides eligible employees of covered employers the right to take unpaid, job-protected leave for specific family and medical reasons. This includes continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave.

In addition to FMLA, some states, such as New York, go further by offering paid family leave to employees. As a small business owner, it's imperative to delve into the regulations specific to your state to determine whether providing such benefits is a requirement. Staying informed about both federal and state-level policies ensures compliance and helps create a supportive workplace environment that addresses the diverse needs of employees.

Maternity/paternity leave

The positive aspect of maternity leave is that there are established rules to guide you in ensuring your employee receives the deserved time off.

Federal and state laws, including the Family and Medical Leave Act (FMLA) or paid family leave, often deal with this type. Compliance with these regulations is crucial in providing the necessary support for employees during maternity leave. 

It's also important to be aware of The Pregnancy Discrimination Act, which prohibits discrimination based on pregnancy, childbirth, or related medical conditions.

Offering paternity leave has become a common practice. Granting fathers the opportunity to take time off to bond with their new child contributes to a more inclusive and supportive work environment. 

Military leave

Managing military leave for employees is an important responsibility for small business owners. If you have employees who serve in the military, understanding the applicable regulations is crucial. While the Family and Medical Leave Act (FMLA) was expanded to include support for military service members, another key legislation to consider is the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).

USERRA is designed to safeguard military employees from discrimination or termination based on their military service. As a small business owner, it's essential to comply with the provisions outlined in USERRA to ensure that employees who serve in the military are protected and that their rights to reemployment are upheld.

Jury Duty

Jury duty obligations for employees should be considered by employers, too. When an employee is summoned for jury duty, using work as a reason to avoid serving on the jury will not be a universally accepted excuse. While some states lack laws mandating employers to compensate employees for missed work due to jury duty, employers must verify the jurisdiction-specific regulations.

Employers should make sure that employees are not subjected to retaliation for serving on a jury. Laws and regulations are in place to safeguard employees, and they must not face adverse treatment for fulfilling their civic duty. Employers should be well-versed in the laws outlined by the Fair Labor Standards Act (FLSA) regarding the compensation of exempt employees when summoned for jury duty.

Bottom line

Small business owners should design time off policies that not only meet legal requirements but also address the unique needs of their employees. While compliance with laws and regulations forms the foundation, going above and beyond to offer relevant and competitive paid time off benefits can significantly impact employee morale and well-being.

Consider using payroll software, such as to enhance the administration of time off policies and ensure accurate tracking and efficient management. 

If any aspects of time off policies or payroll practices remain unclear, our dedicated Onboarding and Payroll specialists are available to assist. Feel free to reach out to them for answers to any questions or concerns you may have!

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