Everyone keeps comparing a home daycare provider to a full time employee when the daycare provider is actually a small business owner. So if the small retail shop on the corner is closed and I can't shop, she's not paid for the day. If the plumber I call is unavailable, she doesn't get paid. Being a small business owner has it's advantages and disadvantages. To me having to plan for an unpaid vacation is simply one of the disadvantages of being a small business owner.
I've seen two ways of handling this issue that seem the most fair to me.
1. Parents pay for any time the daycare is open regardless of if their kids are there or not. However, the daycare doesn't make money if it is closed for vacation or illness.
2. Both sides get a set number of days off each year to use. Appropriate notice must be given to use those days. In this case parents often use their days off at the same time as the daycare providers days off to avoid paying two daycares for that time. However, many parents will happily pay for the providers vacation if they don't also have to pay a provider while they are on their own vacation.
I've run into providers who require a paid vacation and as long as that is clearly spelled out in the contract that is fine as well. It's not how I would want it to work. It was actually the final straw that had me leaving one daycare provider. However, if you have a good provider and her requirements are clearly spelled out it's probably worth it to pay her vacation.