What Is Vacation Pay?

Vacation pay is the compensation paid to a professional while they take their available paid time off. This is typically calculated using an employee’s standard pay rate. However, you could also use a different rate if you want to provide your team with an extended amount of vacation time.

Is it legally required to offer vacation pay?

Most countries around the globe require companies to offer some amount of paid time off to their staff. In turn, you’ll likely have to set aside a certain amount of vacation pay for each of your team members. However, laws surrounding mandatory vacation pay differ from one region to another, so exact amounts will vary depending on where your business is located.

How can you calculate vacation pay for your team?

To calculate an hourly employee’s vacation pay, simply multiply their allocated vacation time by their hourly rate. If you’d like to calculate how much vacation pay they have remaining, use their leave balance instead of their total available PTO. For salaried employees, you must first calculate their hourly rates to be able to get accurate vacation pay data. 

How can you track vacation time in your business?

To track vacation time in your business effectively, you should use a productivity suite with employee leave management functionality. Apps like automated time tracking software can help simplify your management work and keep accurate track of payroll costs in the long term.