Over-the-top employee perks have become synonymous with working at Silicon Valley tech companies. Weekly happy hours, catered meals, pet bereavement services, and free dry cleaning are all now part of the Valley ethos.
Another popular policy: unlimited paid time off. In cooperation with one’s manager, an employee can take as much vacation time as they wish. From an employee’s point of view, it sounds like a great idea, and a terrific way to boost staff morale and reduce turnover, right?
It’s such a great idea that our company just got rid of it.
Instead, we recently announced that we’re offering a fixed number of vacation days. It’s a move that we believe will be well-received by our employees. Here’s what happened.
The Unfulfilled Promises of Unlimited PTO
Our global team works hard and morale is already strong, evidenced by low turnover. At the same time, early on, we recognized that time off is essential to avoid burnout. But we also found that offering unlimited vacation was actually too much of a good thing.
As people knew they could take as much vacation as they wished, they actually took too little. Why?
In speaking with our employees, we learned that many felt guilty taking time off. They felt doing so stood in the way of being perceived as a team player.
Our research also showed that the average amount of time people took off annually was just under eight days. What’s more, barely 10% of our 500+ employees around the world took 16 or more vacation days.
Taking only about one week of vacation every year was, in our opinion, not a sustainable tactic for maintaining a strong, motivated workforce.
Making PTO Mandatory
To encourage our staff to take sufficient time to recharge their batteries, counterintuitively, some would say we decided to do a 180. In addition to implementing a set amount of vacation time, we also reverted to unplanned vacation days, encouraging our team members to take a break when they feel under the weather.
Starting in January, all our employees in the eight countries in which we have offices now have 25 mandatory vacation days, increasing to 30 days after four years with the company. New employees accrue 2.1 days per month, and all can take time off, even if it’s not yet earned, if there are extenuating situations.
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While time off used to vary based on the country in which our employees worked, this new system is the same across the board, because we understood that people get just as tired whether they work in Oakland or Kaluga (that’s in Russia).
Switching to this new system didn’t happen overnight. We needed several months to sell the idea to senior management. Some leaders worried that people would take extended chunks of their accrued time all at once, grabbing up days as if they were running down the aisles in the game show Supermarket Sweep, pulling hams from the fridge.
There were also concerns that encouraging employees to increase their vacation time would cost the company more. In fact, research shows that employees who took an average of 19 days off were more productive than those who took just 10 — and increased productivity leads to reduced costs.
Meanwhile, some workers assumed that anything that HR suggested was automatically not going to benefit them. To persuade our colleagues, we explained the new system in a company-wide all-hands video meeting and posted the policy in Slack.
Time Will Tell
We’re now convinced that as our staff takes advantage of the new rules on defined and mandatory PTO, they will feel encouraged to take their vacation, rather than fear that they shouldn’t because there’s too much work to do.
And while I would love to say that the new policy has been a resounding success, it’s still too early to say. But I do believe that in just a few months our new approach will prove to have been the right thing to do — for our company and for our people.