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- Unlimited vacation policies suck
Howdy!
I’m changing things up a little today, with a piece I put together on unlimited vacation policies.
They’re bad for workers, but companies love them.
I recorded this as a longform walk-and-talk video — if you’d rather watch/listen than read, check out the video here!
Unlimited vacation policies are terrible for workers. But more and more companies are pushing them.
What gives?
Let’s start with a little context.
Where PTO started
Formal “Paid Time Off” started around WWII for factory workers building widgets.
Because your shifts were all about the same length, and you were never the only person that could do your job, factories could give you a certain number of days off a year — because they could just swap in the next person while you were gone, and not suffer any downtime.
It was perfect for a country that was rapidly industrializing around factories and physical goods.
The shift to “startup culture”
Of course, by the early 2000s, the working world in America was totally different.
We’d switched heavily into digital work. And with the internet, a 24/7 work culture started to emerge, with people working longer hours in all kinds of places.
The biggest driver of the new “normal”? The tech industry.
As the dot-com bubble took over the economy, businesses everywhere adopted the “startup mentality”: a winner-take-all marketplace with intense competition, crazy hours, and a drive to exceed expectations.
Then, in 2003, management at Netflix got an idea.
The company had a hard-charging culture, and nobody was tracking how many hours people worked.
The logic was: if we’re not tracking hours worked, why track hours off?
So they said “use your best judgment.”
Unlimited PTO was born.
Fast forward 20 years, and 7% of US companies are offering unlimited PTO — mainly as a perk for high-paying jobs over $120K.
So what’s actually wrong with it?
It undermines vacation time.
The common argument is “you end up taking less vacation.”
I was surprised to find that’s not actually true — on average, people with unlimited PTO take just one extra day off a year.
But… 75% feel pressured to work while they’re away.
So that “perk” ends up feeling like a scam.
83% of employees with unlimited PTO say their companies have cultures in which people avoid taking time off because they’re too busy.
(To be fair, hustle culture also messes with regular vacation policies — 49% of workers with limited PTO still worry about falling behind.)
It’s bad for mental health.
When you spend your whole vacation worrying about work, you’re not actually taking a much needed break.
Many employees list “work” as their #1 cause of negative mental health.
And companies with unlimited PTO do 2.5% worse at “work-life balance”.
It takes money away from employees.
This is the sneaky one.
We’ve seen a 50% increase in the number of jobs offering unlimited vacation in the last year and a half alone.
And when lots of companies are doing something, the answer usually comes back to money.
In this case, it’s called “leave encashment.”
If you’re not tracking PTO… “you don’t have to worry about rolling over paid holidays to the next financial year or paying out owed PTO when an employee leaves your company.” (From this article)
The real problem
Here’s my problem with all of this:
I believe people actually need to take breaks to be their best selves. And that means real breaks, not just checking their emails poolside.
If you want to make it about the bottom line… happy, rested people perform way better than zombies.
So what do you do instead?
My answer is pretty simple:
A fixed amount of PTO, but FORCE employees to use all of it. And when they’re on vacation, expect them to be 100% offline.
It’s better for them, and better for your business in the long run.
What do you think?
3 things from this week
Appetizer: My franchising Q&A with Connor Groce went great — you can watch the recap here. (The guy also writes a killer newsletter, worth a subscribe!)
Main: Going all-in is bad for business. That’s my hot take in this week’s Talk Girdley To Me. Give it a watch and let me know what you think!
Dessert: I feel so seen. (My rankings are here, my hamburger expertise is here.)
Thanks for reading!
Michael
P.S. Vacation policies came up in a Scalepath discussion the other day — other people suggested:
- Set days in writing, unlimited in spirit (backstops abuse)
- Unlimited except during busy season
- Set vacation days with MANDATORY week off for leaders (forces systems and delegation)
- Set days for hourly staff, unlimited for salaried
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