Should Your Company Consider Unlimited Vacation Time?

Here's an interesting stat to throw out over beers this weekend: 80% of US employees (and 90% of Millennial employees) would prefer a vacation to a pay raise, according to Main Street

Clearly, workers are exhausted in the US, where the average vacation time is just 12 days, according to Salary.com. After 10 years at the same company, that goes up to 17 days, and up to a measly 21 days after 15+ years with the same company. Compared to Europe, these numbers are paltry. 

In countries like Germany, Spain, Portugal, and the UK, getting 30+ days of paid vacation per year isn't unusual, even for those less senior. These figures make our standard two weeks look archaic and petty, especially as more people log unpaid overtime hours in the mornings, evenings, and on weekends to keep up with demanding workloads. No wonder Americans are burnt out.

Now, two weeks may have made sense when people truly worked a 9-5 work week, but with so many companies -- particularly in tech -- expecting employees to work outside those hours, it makes sense to think about how we can ensure people get the R&R they need.

"Skimping on vacations... leads to workers that are stressed out and disengaged, consequences that cost U.S. businesses $450-billion in lost productivity last year," according to a Gallop study cited by the Globe & Mail.

One solution being pioneered by about 2% of US companies, according to the Society of Human Resource Management, is to offer unlimited vacation time, or flexible time off (FTO).

Companies like Netflix, Virgin, Groupon, Zynga, The Motley Fool, Pocket, Prezi, Evernote, LinkedIn, and General Electric have already jumped onboard, implementing unlimited vacation policies to better address work-life balance. 

"Rather than earning a fixed number of days off per year, their employees are free to take as much time off as they want or need provided that their work is done," Inforum explains of Netflix's policy. "Employees are valued based on what they accomplish, not on how many hours they spend in the office." 

#70: Netflix Vacation Policy and Tracking: there is no policy or tracking. There is also no clothing policy at Netflix, but no one comes to work naked. Lesson: you don’t need policies for everything.
— Netflix Culture: Freedom & Responsibility guide

What a grown up concept. It's sort of like that moment in grade school when the teacher tells the class that as of that day, they no longer need to raise their hands and ask permission to go to the bathroom. The teacher now trusts them to use their own judgement and slip out at the appropriate moment. 

Sam Decker, the CEO of Mass Relevance, explained his decision to implement an unlimited vacation policy to Fast Company by citing the Pygmalion Effect.

The Pygmalion Effect says that the more trust you put in someone, the more they will fulfill that trust.
— Sam Decker

One of the primary challenges that has come up among companies with unlimited vacation policies is that employees become afraid to take time off. They worry about abusing the system -- they don't want to take too much time off, because they want to maintain an aura of ambition and dedication. As a result, they end up taking even less vacation time, and becoming even more mentally and physically fried. The perk can actually end up backfiring.

Without a fixed metric that relays a maximum number of days off, employees can become overly cautious. Their natural inclination, then, is to look to what their coworkers -- especially senior leadership -- are doing. If your C-suite isn't taking time off, chances are, you won't feel as confident taking time off either.

To combat this challenge at Netflix, CEO Reed Hastings takes six weeks of vacation every year. He is vocal about doing so, and encourages his employees to do the same.  

"I take a lot of vacation and I'm hoping that certainly sets an example," he told CNBC. "It is helpful. You often do your best thinking when you're off hiking in some mountain... You get a different perspective on things." 

Fear of taking "too much" time off is actually why Kickstarter killed their unlimited vacation policy in September, and instead capped annual vacation time at a still-generous 25 days.

“It’s always been important to us to ensure that our team is able to enjoy a quality work/life balance,” a Kickstarter spokesperson told BuzzFeed. “What we found was that by setting specific parameters around the number of days, there was no question about how much time was appropriate to take from work to engage in personal, creative, and family activities.” 

Of course, there's an off-chance that there will be people who abuse the system, but chances are good these people won't be on top of their work anyway. Falling behind on priorities and not meeting targets is a legitimate reason to let someone go -- it's not about them taking too much time off, it's a matter of not fulfilling deliverables. On the other hand, if someone is taking a lot of time off yet still delivering superlative work on time -- even exceeding targets -- then giving them extra time off might not be unreasonable.

"Too many companies design policies for everything from vacations to lunch breaks and work schedules with their worst employees in mind," wrote Jeff Booth, founder of BuildDirect, which started offering unlimited vacation in January. "HR teams develop blanket rules aimed to keep the lowest performers in check."

The alternative? "Extending freedom to employees. By turning the tables – expecting the best of your team, rather than the worst – you encourage everyone to rise to the occasion," Booth explained. "Freedom to manage one’s own time builds a spirit of entrepreneurship, shared responsibility and accountability. At its core, unlimited vacation is about thinking like a leader, rather than a follower, and encouraging employees to focus on actual results rather than hours logged."

Do you think unlimited vacation time is a good idea? We'd love to hear your honest thoughts and opinions on why or why.