January 18, 2016

How to Set a Fair Vacation Policy for Your Small Team

This post is the second half of a series that explores the importance of vacation time and how small companies can manage it. The first piece looked at how employees can use their time off to create a healthier work-life balance. This piece looks at how employers can manage vacation time optimally.

Vacation policies are a delicate balancing act that look different from one organization to the next. No matter a company’s size or industry, though, its time-off policy must be fair to both employees and the employer.

“Fair” in this case is more nuanced than it would seem at first blush. Consider what happens when an employee accrues years of unused vacation days, for example. Those go on the company balance sheet as liabilities, the Wall Street Journal‘s Rachel Emma Silverman points out, and a company must be prepared to compensate the employee if she leaves or retires.

At the same time, an unclear time-off policy — or a company culture that promotes workaholism — benefits no one. “An employee who works, works, works is stressed and zombie-esque,” U.S. News Careers editor Laura McMullen writes. “One who vacations now and then is rejuvenated and more focused. Which would you rather work with?”

Here are three big-picture things to think about when setting your company’s own time-off policy.

How to Manage Vacation Requests and Time Off

We wrote last year that employees should be able to request time off — and managers should be able to approve time off — via email. We built that same feature into Kin because it felt like such a natural way to manage those requests while saving everyone time and energy.

Beyond the details of processing time-off requests, author and former Harvard Business Review editor Karen Dillon has a handful of thoughtful tips for how managers can handle vacation requests.

Her first tip touches on something that is important and often overlooked: “Don’t be judgmental about how people spend their time off. The employee who is deeply involved in competitive dog shows will be just as recharged by spending a week doing that than the employee who wants nothing more than to sit by a pool at a pricey resort. As a manager, it’s not your job to judge or prioritize how people choose to spend their time off.”

As far as accommodating everyone’s vacations, Dillon suggests a company could implement a rota system so that certain employees get to choose their vacation days first, and make sure that list of people with first choice changes annually.

Another option, she writes, is to simply close up shop for a week or two. This approach frees managers from any criticism about playing favorites, and it ensures everyone takes their vacation days.

That last point is important: America seems to have a real problem with employees failing to take all of their vacation days.

Mountain

Does an Optimal Vacation Policy Exist?

It’s up to each individual company to determine how many days off an employee receives. Paychex subsidiary SurePayroll recently conducted a survey of 259 small business owners to find out how much paid time off they offer employees, and three-quarters of respondents said 10 days or less.

Time-off policies themselves tend to fall into one of three broad groups:

  • Employees get a fixed number of vacation days at the beginning of a work year.
  • Employees get a certain number of vacation days each year, but unused days roll over.
  • Employees have unlimited vacation days.

Interestingly, when employees have a fixed number of “use it or lose it” vacation days, they are much more likely to actually take all of their vacation days, The Atlantic‘s Joe Pinsker writes.

Pinsker cites data from the U.S. Travel Association, which found that 84% of employees working under “use it or lose it” policies take all of their time off. When employees have the option to roll their vacation days over, however, less than half use all of their annual paid time off.

Across all companies and all industries, Pinsker writes, 41% of Americans leave at least one vacation day on the table.

Why Employees Fail to Use Their Paid Vacation Days

The immediacy of “use it or lose it” vacation days helps explain why those employees actually take the vacation days that already belong to them — that policy leaves little room for ambiguity.

When policies do leave room for ambiguity, such as when vacation days are unlimited and go untracked, employees tend to err on the side of appearing industrious. Kin’s team used to have an unlimited paid time-off policy, which Craig Bryant has written about before. As Craig notes, our company made the switch to a staggered time-off policy because the unlimited days “did a pretty poor job of getting folks out of the office.”

In some company cultures, workaholism unfortunately is sometimes rewarded. As Pinsker writes, “One of the [U.S. Travel Association] report’s most telling statistics is that 15 percent of senior managers said they view employees who take all of their vacation days as ‘less dedicated’ — and that’s just the percentage who would admit it.”

Creating a Clear Vacation Policy

Laying out an unambiguous time-off policy will help alleviate employees’ fears that their vacation requests could make them seem “less dedicated.” Each employee’s vacation time is theirs, after all. Doing this also communicates a level of professionalism that is often rare among smaller teams.

Payroll software provider Execupay has some helpful guidelines for creating a paid-time-off policy. At minimum, the company suggests, any policy should include:

  • “Who is eligible for PTO
  • The amount of PTO provided
  • How PTO time accumulates
  • Whether they can carry over from year to year, and if so, how many
  • The use of PTO during FMLA leave, if your company is subject to the law”

Let none of this research dissuade you from creating an unlimited-vacation-days policy, though, if you feel this would be successful at your own company. Two things are necessary for unlimited vacation policies to work.

First, you still need to track each person’s vacation days so your team can know who will be off when. Tracking also helps you understand how expensive this policy is to your company, and it also can communicate to your team that you want to make sure they take enough vacation time.

Second, as author David Burkus writes at HBR, trust needs to be baked into your company culture. “[T]here’s some evidence to suggest that showing trust in others actually helps them trust you more,” he writes. “Researchers who study game theory consistently find that when one person shows faith in another, the second person’s faith in others also rises. They’re also more likely to pay that trust forward, by trusting third parties who weren’t involved in the additional transaction. So there’s some theoretical evidence that implementing such a policy not only takes advantage of existing trust, but builds additional trust.”

Or, you could just do as Authentic Jobs‘ co-founder Cameron Moll did and mandate that everyone take a minimum number of vacation days off.

Skyline

How Companies Can Encourage Employees to Use Their Vacation Time

A company’s leaders ultimately need to set the tone for the company’s vacation policy. This includes ensuring everyone takes their allotted time off and fostering a culture that doesn’t make people feel hesitant to take their vacation days.

Here are three ways employers can do this.

Create a Pro-Vacation Environment

“If you are in management, you are very likely part of the problem because you make your employees feel like they can’t take a day off,” adventurer Brendan Leonard, who blogs at Semi-Rad.com, writes of the American reluctance to take our vacation days.

“You know that Bob, in a typical day at his desk, is only working about 60 percent of the day anyway, when he’s not looking at Facebook, eating lunch, or sitting in meetings listening to all your amazing ideas. You might as well encourage him to take a week or two off, so on that Monday he comes back into the office, he’ll actually be productive because so much stuff backed up while he was gone.”

Forbes contributor Adam Hartung even has a new application for vacation tracking: “No company tracks how often a boss calls, texts, emails or phones a subordinate when on a holiday. No company tracks how often a boss requires a subordinate to ‘check in’ with the office while gone. Nobody pays any attention to how many hours an employee on vacation uses their mobile device or PC for company business while, ostensibly, ‘vacating’ their work in order to relax and recharge.”

Hartung’s idea might be tongue-in-cheek, but it’s not a bad one.

Senior Leaders Should Be Public About Their Own Time-Off

“Many managers and senior leaders get very public about taking time off and taking it in long stretches,” Burkus writes in his Harvard Business Review piece. “That way the message is clear that taking vacation won’t hurt your performance review or career prospective.”

And if employees are still loathe to take time off at that point, then there is always the mandatory vacation option.

Set Minimum Time Off Quotas

Companies with unlimited paid-time-off policies seem to have found success by mandating that employees take a minimum number of vacation days.

Authentic Jobs‘ co-founder Cameron Moll did this: Employees there have at least 12 holidays and 15 vacation days to take off. Marketing software giant HubSpot does something similar. HubSpot COO J.D. Sherman told The Washington Post‘s Jena McGregor that the company’s stated vacation is “two weeks to infinity.”

images by:
Mark Bosky, Adam Zvanovec, Bogdan Dum

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