Vacation pay is the compensation that employees receive when they take time off from work for vacation. It is important to understand the difference between vacation time and paid vacation because an employer may not always compensate you during your time off. Vacation pay is usually accrued over time, where a certain proportion of vacation pay is earned for every hour of time worked. Employers are not required to pay their employees paid vacation time, but most companies offer vacation pay to be competitive in recruiting, increase employee morale, and minimize turnover rates. The amount of paid vacation offered varies by industry and with employee expectations. Eligibility for vacation pay among employees cant be decided based on religion, race, gender, disability, or other protected class. Unused vacation pay is typically paid to an employee in cash when he or she leaves the employment of an organization.