Selecting a vacation policy that takes you further than just the beach
Published: April 2019
Your Vacation Policy Should Do More For Your Firm
A well-implemented vacation policy can help with everything from improving performance, to avoiding burnout, to helping attract top-level talent. 23% of millennials view paid vacation as their top priority in 2018 and a quarter of workers view vacation time and paid time off (PTO) as the most important non-salary factors when considering a new position.
A strong vacation strategy can help improve your company’s overall performance, head off employee burnout, provide redundancy for key positions, help with performance evaluations, and aid in fraud prevention.
Below we examine potential goals for your vacation policy, the three main types of policies, and some special considerations.
Vacation policies impact much more than just employee happiness so make sure your policies align with your overall firm strategy.
Unlimited vacation isn’t typically as effective as managers believe.
Higher performers take more time off. 19 PTO days for high performers vs 14 days for average performers.
What A Good Policy Can Help Achieve
THE IMPACT OF STRATEGIC BENEFITS
Organizations that use benefits as a strategic tool for recruiting and retaining talent reported better overall company performance and above-average effectiveness in recruitment and retention compared with organizations that did not.
58% vs. 34%
Effectiveness in recruitment:
19% vs. 8%
Effectiveness in retention:
28% vs. 11%
Source: Society for Human Resource Management. (2017). 2017 Strategic Benefits Survey—Strategize with Benefits. Retrieved from www.shrm.org
There’s more to a vacation policy than just being an almost required incentive. There is strategic value in selecting a policy that matches your goals. Here we look at five potential goals you can shoot for with your policy.
Improved Company Performance
The first potential goal is an overall improvement in company performance. A 2017 study by Namely (a human resources platform) found that employees who took more time off tended to have higher performance ratings. On average, high performing employees took an average of 19 PTO days, while average performers took an average of 14 PTO days.
Employee burnout can occur at any level and when it happens it can drastically reduce performance and morale. Stepping away and detaching from work and stress for a while can help prevent employees from becoming overloaded. In this case, an ounce of prevention is worth well more than a pound of cure. By the time someone actually burns out, it takes a significant amount of recovery time for them to return to their prior productivity levels.
It is important to have backup plans for your most crucial employees. A good way to accomplish this is to have others fill in for their duties during vacations. As one employee takes time off, having another one handle their workload will help get them up to speed on everything the vacationing employee is working on. By doing this constantly throughout the year, you’ll build a more robust team.
Improve Performance Evaluations
One way of evaluating how competently someone is performing a task is to have something to compare it to. When an employee is taking a vacation, compare their replacement’s work to the work they normally do. Have a conversation with the replacement about the complexity of tasks, the time required to complete them, their relative difficulty, etc. If the replacement is less experienced, this should give you a bare-minimum benchmark to compare the vacationing employees’ work to. If the replacement is more experienced, this gives you a high-end aspirational benchmark for the vacationing employee.
Although somewhat unintuitive, uncovering deceptive practices can be a benefit of a well-structured vacation policy. If an employee is involved in something unscrupulous involving the company, and they are forced to take regular time away, it becomes much more difficult to successfully manage the scheme. This becomes especially harder when a temporary replacement fills in for their normal tasks during that time.
A Special Consideration for Digital Firms
Many firms have that one or two “rockstar developers” or “genius designers” who everyone believes to be indispensable to the company. By building a vacation policy that mandates time away, and by rotating other employees onto their work, it can help de-risk these situations. If something happens to your highly talented employee, others who have worked on their projects will have an easier time picking up the slack.
You will likely experience pushback in the form of “But they’re the only one who knows how this works.” We would counter with questioning if that is really good for your company? This is an excellent opportunity to ensure software and process documentation are in order. Get another employee trained up on it and get that first one to take some time away. A burnt-out rockstar developer will be almost as effective as a new intern.
Three Main Policy Types
The Standard Policy
The standard vacation policy offers paid time off (PTO) for various categories like vacation and sick days. Some policies are use-it-or-lose-it while others allow a certain number of days to roll over each year and accrue up to a certain point.
This is the most common type of policy so everyone understands how it works.
This policy comes with extra management since HR will need to track each bucket of time off (vacation, sick, personal, etc.). It is also more frustrating for an employee to use since they’ll also need to track each of these buckets themselves. It doesn’t give much flexibility to the employee and communicates an older style of thinking. This is seen as the bare-minimum and won’t help positively differentiate your firm from others.
The PTO Bank
This policy combines all the categories from the Standard Policy into a single bank of PTO days that an employee can use for any reason, vacation, sick days, personal days, etc. Similar to the Standard Policy, companies can allow rollover days or empty the bank at the end of each year.
Employees, especially in tech, may view this as more valuable than an Unlimited policy since it comes with an expected amount of time away each year. This can make them feel more comfortable using it. This policy is easier to manage as there are fewer things to track. It can also help with recruitment as it’s more flexible for employees.
A PTO bank policy isn’t as flexible for employees as a well-implemented unlimited plan and there are still costs associated with an employee leaving since the firm will need to pay out any unused days.
The Unlimited Vacation Policy
Unlimited vacation plans essentially state “as long as it’s approved, an employee may take as many days off as they wish for whatever reason.” It changes the dynamic between employees and employers in that it passes more control to employees.
When implemented correctly, this strategy helps build trust between the employer and employee. It communicates to employees that you believe they’re able to make the best choices for themselves with regards to how much time away they require. This helps improve employee happiness which in turn helps enable them to reach their full potential at work.
Another benefit is this plan can help limit the spread of illnesses as sick employees are more likely to stay home when they don’t feel well.
This plan can also help reduce your costs when employees leave the company. With a traditional PTO plan an employer will typically need to pay out any unused vacation days. However, with an unlimited policy, there aren’t any accrued PTO days.
The major downside to this strategy is that it is often implemented so poorly that it has become a running joke among digital workers. Many digital workers see unlimited vacation policies as little more than a public relations tactic. If it’s not implemented properly, this strategy can fuel a hyper-competitive environment where employees are viewed as better/harder/more dedicated workers if they never use their vacation days.
Other Options to Consider
These options are good to mix in with your overall vacation plan to help round it out and give your company an edge with attracting and retaining talent.
Something that’s gaining popularity is offering summer hours where employees have the option to front-load their weeks and take Fridays off, or stretch their weeks by a day and work fewer hours each day. This is an easy way to offer flexibility while still ensuring the required work is completed. This option also helps reduce the reliance on vacation days since employees have more leeway with how often to come in to the office.
This option falls a bit outside of the vacation discussion, but it has implications on how employees use their PTO, especially when it comes to sick days. This option can be especially valuable when used in conjunction with PTO bank style plans. It gives employees the option to work remotely without using up a PTO day. This gives them the freedom to use the PTO day later for a recharge when they really need it.
This option is great when you have a group of employees who are very much against taking time away. Some firms pay their employees a vacation bonus to take a time off, but they make it contingent on that employee truly disconnecting. Others help reimburse travel expenses. This can act as a big draw for top-end talent as it communicates to employees your firm cares about their personal wellbeing as much as their productivity.
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