The Indiana Department of Labor administers the state's employment laws, including statutes relating to vacation time for employees. The laws are much more explicit about wages and overtime pay than vacation time. Employers generally may set a vacation policy of their choosing, so employees who count on receiving a certain amount of vacation time should check with the employer before starting a job.
Indiana labor laws do not require employers to offer vacation time. The labor department classifies vacation time as a fringe benefit, which generally means employers have the option of whether to offer it. State law requires only that employees receive pay for actual time worked.
Indiana employees who receive vacation time from their employer may not have complete freedom to use it when they choose. State labor law allows employers to set parameters for when employees can use the time. For example, employers can create a policy requiring employees to use accrued vacation time by the end of the year or lose it, rather than carrying it over to the next year.
Upon separation from employment, a worker may want to collect payment for unused vacation time. Indiana's labor laws view accrued vacation time as a form of compensation, meaning an employer may indeed have to pay an employee for unused time in that circumstance. However, employers may establish a company policy stating that employees will receive payment for unused time only by meeting certain conditions – for example, giving at least two weeks of notice when resigning.
Regarding fringe benefits such as vacation time, the primary direction from many state labor boards, including Indiana's, is to maintain a consistent policy. Employers may not discriminate in any aspect of employment – including the provision of benefits such as vacation time – based on age, race, gender, religion, national origin or disability. Employers may alter the general policy by, for example, reducing employees' vacation time across the board. The employer must not discriminate when making the change, and must give advance notice. The change cannot be retroactive.
Federal and state labor laws distinguish between mandatory benefits and optional benefits such as vacation time. Employers in Indiana and other states must provide benefits that include contributing to the Social Security fund, state unemployment insurance fund and workers' compensation coverage. "Leave benefits," such as vacation time, holiday time, sick leave and bereavement leave, are optional. However, a federal law requires employers to offer 12 weeks of leave a year to attend to a serious illness or the birth of a child.