Dharmesh and Hubspot just shared some great advice today on this topic.
Their new vacation policy is "If you need time off, take it." 7 words. This is awesome.
They'll tell you what days they need off, and they probably are going to deserve a lot more in today's internet world than their fathers and mothers used to get. Since we all seem to work at home and on the weekends non stop.
People are generally responsible and act like adults when we let them. Rules and regulations always come up so easy in our minds. Why? Have we really been burned by some employee thinking they are entitled to 6 months off? It's more like we think the rules of "you only have these many weeks" is a way to avoid any uncomfortable conversation later if they don't work very hard and still take 6 weeks off. Sorry to say that person isn't going to magically become a better employee with some more rules to follow. You are going to have to converse with them about improving their game or letting them go regardless.