Companies exist to make money. Companies need employees to do work so that they can make money. In a recent LinkedIn post I called “unlimited vacation” a scam.
My post seemed to resonate with a lot of people…and also upset a few people. Let’s break it down to see if we can find some common ground.
Scam: a dishonest scheme; a fraud
Companies that offer “unlimited vacation” are not being honest with their employees. Why?
Unlimited: not limited or restricted in terms of number, quantity, or extent.
Companies need their employees to do work or they will go out of business. It’s impossible for a company to offer their employees a never ending amount of vacation days and still stay in business. So, while the company policy may have no official limit, at some point your request for vacation will be denied…because the company needs you to actually do work. Who will deny your request? Generally that will be your manager.
Ok, so now when you see companies claiming “unlimited vacation”, you can understand that to mean that “you get no guaranteed amount, or official limit, of vacation time, but you have to get time off approved by your manager and generally have to make sure things go smoothly in your absence.”
Hmmm, that doesn’t sound as good as it did a minute ago.
Unlimited Vacation or No Vacation Policy?
Many companies with so called “unlimited” plans, actually have no vacation policy. “No vacation policy” doesn’t sound as good in job postings and doesn’t get you press coverage, so they call it “unlimited vacation”.
To their credit, Netflix, considered a pioneer of unlimited vacation, called it what it was:
If a company has no vacation policy, anything they say in job postings or during the interview process is non-binding. You’ll often hear things like “most people take 3-5 weeks off each year”, but if you ask them to put it in writing, they won’t. You will have no guarantee of any time off.
A hundred different vacation policies
Having no guaranteed amount, or official limit, of vacation time means that how much vacation time you actually get will be a continual negotiation between you and your manager. What if your manager is a workaholic? What if your manager doesn’t like you? What if your manager wants a promotion and so he over promises what his team can do?
Wouldn’t you rather negotiate your vacation time once, before you accept the job, when the company desperately wants to hire you, and you have all the leverage? Once you are an employee, you lose all your leverage and you are at the mercy of your manager.
Nine months after I started working at Netflix, I told my manager that I would be out for three days in early January. His response: “But that’s when we are launching our first international country!”
I hadn’t done any work on the international launch because, for the past several months, I had been working nights and weekends to complete the new Netflix app for the Xbox. I was consistently working 80-90 hours a week and I was totally burnt out.
I felt completely helpless. I also felt guilty about asking for time off.
Some people will say that I just had a bad manager or that Netflix had a culture problem. On the contrary, I really liked my manager and Netflix company culture is the stuff of legend. The problem was that we had different expectations about how vacation should work.
Joshua Reeves, CEO of Gusto, pointed out this exact issue: “Even if your time off is technically ‘unlimited,’ your manager obviously doesn’t expect you’ll take off 75% of the time. Actually, he or she probably has at least a general range of number of days or weeks in mind that is acceptable for an employee to take off—even if that range hasn’t been openly communicated.”
This is exactly what happens when you have no defined vacation policy. Instead of no vacation policy, you end up with hundreds of different vacation policies, one for every manager, and none of them openly communicated.
Other problems with unlimited vacation
Employees tend to take less vacation. Namely, an HR Software company, published a study in 2017 where they found that “employees with unlimited vacation plans take an average of 13 days off—compared to a traditional plan average of 15 days.” You can download the report here. We experienced this at Facet.
Often associated with “always on” work cultures. A Netflix spokesman Steve Swasey, told the Wall Street Journal in 2011 that “the company stopped tracking vacations in order to ‘focus on what people get done, not on how many hours or days’ they work.” Sounds good to me. But then Mr. Swasey goes on to describe the effects of this mindset.
“The practice suits the culture at fast-growing Netflix. We work weekends and around the clock; people work many hours,’ ‘often from home or elsewhere via laptop or smartphones…’ Mr. Swasey says Netflix employees keep in touch via email or phone when they are on vacation. ‘People are on all the time.’
“During a three-week trip to Africa with his wife last year, he logged on and made work decisions in Johannesburg. Mr. Swasey says he doesn’t mind working while away, but ‘sometimes my wife is not so sure. I’ve been known to hide away on the balcony of the condo in the early hours, when she’s sleeping.’”
And it’s not just Netflix. A poll by Insider found that employees with unlimited vacation plans were twice as likely to “always work” while on vacation. (29% vs 15%)
No payout of unused vacation days. Under a traditional plan, vacation days are part of your compensation. If you earn vacation days, but don’t use them before you leave the company, the company will pay you cash for those days. In some states, employers are required by law to pay out unused vacation days. By switching to an “unlimited” vacation plan, you don’t earn vacation days and so they won’t ever be paid out. This saves companies a LOT of money and is one of the main reasons companies switch to unlimited vacation plans.
Additional overhead for managers. “Relationship with their boss” is one of the top reasons employees quit their job. Without an official policy, managers end up having to make all the decisions about time off for their employees. This is an unnecessary burden for managers. It also creates an unnecessary potential source of conflict between manager and employee and increases the risk of a bad relationship between boss and employee.
No protection for employees. With no vacation policy, companies are basically telling employees “trust us - we’ll treat you right!”, without offering any guarantees. Employees get no protection from abusive managers.
Abandoning unlimited vacation at Facet
For the past eight years we’ve had an unlimited vacation policy at Facet. When I returned to the company in late 2018, employees expressed frustration at our lack of a vacation policy. They were taking less vacation than they had at previous jobs and didn’t know how much vacation was okay for them to take.
When we looked into it to see if other companies were facing similar issues, we discovered all of the problems outlined above. We decided what we needed was a written policy that sets clear, company wide expectations, but still gave managers and employees the flexibility they got with the old plan.
Facet employees worked together to create our new policy and we think it’s pretty great.
The new Facet PTO policy
- Every Facet employee gets a minimum of five weeks (25 days) of PTO every year. 8 of the 25 are company holidays, the remaining 17 days can be taken at the employee’s discretion.
- Additional PTO days can be negotiated at the time of hire. (We want to be able to attract senior talent.)
- Employees earn an additional day of PTO for each full year of employment at Facet. (We want to reward employees for staying with Facet.)
- PTO days accrue every pay period pro-rata. (You earn time off every day you work.)
- A maximum of 5 unused PTO days can roll-over from year to year. (We want employees to take at least 20 days off each year.)
- Additional PTO days or early accrual may be granted by your manager, with approval from HR. (We want employees to have the flexibility to take more time off if needed.)
- If you leave Facet, we will pay any unused PTO days you have accrued, at your regular salary. (You’ve earned it!)
We also offer six weeks of paid maternity leave for mothers, two weeks of paid paternity leave for fathers, and paid time off for bereavement. Any other time off you need just requires a conversation with your manager.
Whenever possible, employees should share their time off plans with their team and manager at least two weeks in advance, and make sure their areas of responsibility are covered by someone while they are out.
Finally, and this is important: vacation is sacred. While on vacation you should be completely unplugged from work - no email, slack, etc. If there is an emergency, we will call you.
Clear, flexible and generous
Our new vacation policy gives employees all the benefits of an unlimited plan, without any of the downsides. Expectations are clear and we’ve put our values in writing.
The new vacation plan goes into effect in 2020 and we’re very excited about it.
As always, I’d love to hear your feedback. You can reach me at email@example.com.