At every company I have ever worked, from small startup to big corporations, there had always been a capped vacation day policy. Vacation days would range from 10 to 20 days a year, depending on your role within the organization. But we tried something last year at our Restaurant Furniture Plus business—we moved to an unlimited vacation day policy. And an interesting thing happened along the way. Read on.
The Advantages of an Unlimited Vacation Day Policy
The obvious primary advantage of an unlimited vacation day policy is your staff’s positive reaction. When we told our team we were moving from a traditional two weeks of vacation a year to an unlimited plan, their reaction was “WOW!!” It earned us a lot of goodwill with our staff, as they saw that as a huge perk, having the flexibility to take as many vacation days as they want.
The secondary advantages included things like: (i) you no longer had to worry about tracking all the vacation days by person, which becomes more onerous as your employee base scales; (ii) there is no longer the need for tracking how many vacation days carry over from year to year, or how many untaken vacation days needs to get paid out at the time of an employee’s termination; and (iii) it is a huge recruiting advantage for your business when trying to attract new talent.
The Disadvantages of an Unlimited Vacation Day Policy
The obvious primary disadvantage of an unlimited vacation day policy is your staff could take advantage of that perk, and potentially take many more vacation days than you ever reasonably thought they should be taking with a capped policy. But this disadvantage is largely kept “in check” by the employee’s psychology, as described below.
The Psychology of the Employee With an Unlimited Vacation Day Policy
It is interesting the psychology of an employee with an unlimited vacation day policy. There are three drivers that typically are on their mind: (i) they don’t want to be perceived as abusing the system, so they typically take about the same amount of vacation days they would have under a capped policy; (ii) they are all busy people, and don’t want to be buried by a sea of work upon returning from their vacation, which typically doesn’t have them away from the business for very long or very frequently; and (iii) they are often taking vacations with their friends or family, and those other parties are typically focused on their limited vacation time during the summer or the holiday season.
The Required Psychology of the Employer with an Unlimited Vacation Day Policy
At the end of the day, there is only one metric that matters on this topic—is the employee satisfactorily getting their job done and hitting their agreed upon goals, or not? If they are hitting their goals, it doesn’t matter if they are taking 2 weeks or 20 weeks of vacation, you should be thrilled with the outcome of their successful results. So post making this change, stop thinking about “why your staff member just took a three week vacation”. Instead, think about, “what has their job performance been, and are they hitting their expected goals, or not”. Said another way, manage your staff on their “outcomes”, and not their “methods”.
What an unlimited vacation day policy really is, is an exercise in trust. Trusting that your staff are all adults and will naturally do the right thing, by not abusing the system. And the reverse of that, your employees feeling empowered and trusted by their managers, which makes them feel good about their relationship with the company. Which in turn, helps promote their long term loyalty and retention with the business. We weren’t sure this move to an unlimited vacation day policy would work or not, but both our management and our team could not be more thrilled with the results.
George Deeb is a Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook.