Why That Unlimited Vacation Policy Might Be Hurting Your Company’s Growth

Unlimited vacation policies – which ostensibly allow employees to take off as much time as they want – have become increasingly popular and are starting to spread throughout the country. At first glance, this trendy policy seems like a win-win. For CFOs, the company’s balance sheets are freed from accrual liabilities; and for employees, they have the flexibility to take off a month or six weeks for that big trip they’ve been planning. 

Recent studies have shown, however, that employees with unlimited vacation policies have taken off less time than those with traditional vacation allotments. Companies that offer these unlimited policies, hoping to help their employees find balance, are finding that just the opposite has happened. Why? In short, many employees don’t believe their company truly stands behind their policy. When employees have to ask for, rather than are given, time off, many feel guilty or nervous about their requests, even if it’s just a week or two, well within the typical range of more traditional paid time off policies.

While unlimited vacation policies may seem attractive and progressive at the outset, they’re often worse for companies and employees in the long term. Yes, companies are getting more time from their employees; but with no breaks, those employees will burn out, and their productivity and motivation will wane. Even worse, high burnout can lead to increased turnover as employees search for a company that, paradoxically, seems to offer more time off.

In my experience, a predetermined vacation policy, while conventional, is actually the most sustainable method to find balance for your employees and, ultimately, grow your business. I’ve found the following methods to be successful in enforcing a healthy vacation policy.

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Scratch the blank check

Set a firm vacation policy from the outset. If employees know they have a blank check when it comes to time off, they may feel motivated to continually push off their vacation to a better time when there is less work – and that time may never come. However, if employees know they have, for example, three weeks off per year, they’ll feel an impetus to use their time and maximize their allotment. If they need to take more time off, flexibility can be discussed on a case-by-case basis, or they can take the time unpaid. 

Lead from the top

Even with a set number of vacation days, employees may still feel hesitant to take time off, especially if they don’t see their peers doing so. To encourage my own employees at Sage Intacct to take time off, I set the company attitude towards time off from the top – I use all my vacation days, each and every year. If my employees see me planning time off, delegating responsibilities and actually leaving for a two week trip, they’re more likely to do that as well, creating a positive culture of work-life balance. 

Offer incentives

If all else fails and your employees are still holding on to their time off, try implementing an incentive policy to get employees to take vacation time, not just accrue it. For example, offer to pay for two family dinners on an employee’s trip, or one night at their hotel of choice. When employees feel financially supported by their compnany, they’ll be more likely to take time off. Finding creative ways to ensure your employees have a good work-life balance is important for driving long-term employee loyalty and satisfaction.

As with any business, you’ll sometimes need to ask your employees to work more in accordance with business cycles. When the cycle has passed, making sure employees are taking time off to recharge their batteries and come back to work refreshed is vital to long term success. While each company must decide what policy is best based on its unique needs, I believe that taking vacation policies back to basics is the key to not only happy employees, but ensuring a company’s growth and sustainability for years to come.


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