One of the smartest things we ever did was offer our employees unlimited vacation. I know it sounds crazy for startups to tell their employees they can take as much time off as they want, but it’s really not crazy at all.
There are two huge benefits you get with having an unlimited vacation policy:
A. You don’t have to reserve cash to pay off unused employee vacations.
One of the biggest challenges you have as CEO is actually getting your team to take vacations. Yes, you really do want your team to take vacations because they will get burned out if they don’t take vacations.
The reality is that you have to beg many of your most dedicated employees to take a vacation. Even then, there will be unused vacation that builds up over time.
You have to reserve cash for unused vacation because you have to pay that vacation off in salary to employees that resign or quit. If you have an unlimited vacation policy, you no longer have to reserve any cash for vacation.
This is gives a little more financial flexibility to work with. You never know, that extra cash may come in handy when times get tough.
B. You appear flexible and generous to your team.
Your team loves the idea that they can take as much time as they want off. There’s obviously a catch in this (I’ll explain this next), but if someone wants to take a long weekend or longer than normal vacation, your policy gives them the ability to do this.
So everybody wins with an open vacation policy. Your employees feel they get to take more time off. And you don’t have to reserve your precious cash for unused vacations.
You don’t need to worry about your employees taking advantage of having unlimited vacation.
The debate we had was a couple of our founders were worried that some employees would take advantage of having unlimited vacation. The question became how do you stop that from happening?
The first way you stop vacation abuse is obvious. You hire the right people. When you have the right people, they will self-regulate and not abuse the privilege you’ve given them. This will solve about 80% or more of the worry about vacation abuse.
The second way you stop vacation abuse is through explaining that employees need to get their work done if they are going to vacation. This means that you and your managers are going to still have to approve vacation requests just like did previously.
The challenge comes in the grey area where a key team member has planned a vacation and the team member is in the critical path on a project. The key here is communication between you and the team member.
Most of the time, you can work through the issues ahead of time, so the impact on the company is minimal. And most of the time you’ll find the team member will work extra hard before the vacation to not be a roadblock.
You can screw up unlimited vacation too if you’re not careful. Here’s how:
Blossom worked at a company that had unlimited vacation. However her boss was too strict about when and who could take vacation.
My wife’s boss also liberally took a lot of vacation. The result was that Blossom and her teammates were unhappy with the double-standard. The team felt that all the talk of unlimited vacation was garbage.
You can also screw up unlimited vacation if you don’t hold your managers accountable. For example, let’s say that an employee in the critical chain takes a vacation, but the work isn’t done before the vacation.
You talk to the manager and the manager says that, yes, the vacation was approved. Now you have a choice to make.
The problem isn’t the employee taking the vacation. The problem is that the manager didn’t work with the employee beforehand to make sure the employee’s work was completed.
The whole system will break down (as it does with a standard vacation policy) if the managers don’t manage through these situations. That’s where you come in because you have to hold your managers accountable.
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