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.

Prevent Burnout

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.

Redundancy

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.

Fraud Prevention

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.

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.

Pros

This is the most common type of policy so everyone understands how it works.

Cons

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.

Pros

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.

Cons

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.

Pros

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.

Cons

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.

SHRM 2018 Employee Benefits https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2018%20Employee%20Benefits%20Report.pdf

Namely HR Mythbusters https://library.namely.com/hr-mythbusters-2017

Access Perks 2018 Employee Benefits and Perks Statistics https://blog.accessperks.com/2018-employee-benefits-perks-statistics#pto