November 21, 2023
What is the Cost of Employee Turnover?
In this article, we’ll look at the cost of employee turnover, break down the direct and indirect costs asso...
The concept of the mandatory vacation policy is a new and novel approach to paid time off. It goes against what most of us expect from traditional paid time off (PTO) policies. Yet it might be the best approach for both the company and the employee.
So what is this policy all about? Why is mandatory vacation growing in popularity? And are there any real and noteworthy companies that have mandatory vacation?
Keep reading to learn more.
A mandatory vacation policy is a policy requiring employees to take a minimum number of days’ PTO each year.
This goes against the traditional way vacation time works, which generally only focuses on a maximum number of days employees can take off.
It might also be called a number of other names, such as a “minimum vacation policy”, “mandatory PTO”, “mandatory time off” or “compulsory vacation”. But for each term, the concept remains the same.
A mandatory vacation time policy is meant to address issues where employees, for one reason or another, don’t take enough time off from work.
This most often results in overworked and burned out employees. Mandatory vacation time seeks to prevent this, by ensuring that employees take time to rest, recharge and recuperate during the year.
You might think that if paid leave is available, people will take it. But it doesn’t end up working out like that.
55% of US employees don’t take all their PTO. There are a number of reasons why.
For some, their workload is too high, and they fear they can’t avoid taking any time off, even if PTO is clearly part of their earned benefits.
In some cases it’s not specifically about workload, but just the perception that people might see them as less committed to the company, and less hard-working if they take a vacation.
Others stockpile leave for a long time, wanting the peace of mind to know they always have vacation days available, but never end up taking any.
The problem tends to be bigger in companies with unlimited paid time off policies. Since there’s no number attached to your PTO allowance here, the expectations are unclear for what is and isn’t acceptable.
Thus, employees in these companies can often be too afraid to take leave at all, because they’re scared that it will look like they’re abusing the system.
For the company, you want your employees to be taking their accrued vacation time. It helps people stay happy and healthy at the workplace, which benefits the company long-term.
If you’re running a team, you want your team members to be fresh, energized, and productive. That doesn’t happen when they’re too afraid to ask for time off.
In addition, unused leave doesn’t actually save the company anything. It generally adds up into a huge liability, since any outstanding employee vacation time has to be paid out when the person leaves their job.
Let’s take a look at some of the positives and negatives of making the choice to implement mandatory vacation time in your business.
On the plus side, mandatory paid time off should result in a happier and healthier team.
Vacation time is important for physical and mental health. It offers an opportunity to switch off and recharge the batteries, before one gets to the point of overwork or burnout.
This also helps improve company culture. The vibe from unhappy employees spreads throughout the team. Keeping everyone in a good mood does the opposite, and creates a positive environment where collaboration can thrive.
Healthier and fresher employees also means better productivity, and should result in fewer accidents around the workplace.
Mandatory vacation prevents leave from stockpiling, which can be troublesome for the company’s books. The City of Jacksonville, for example, had to pay out over $400,000 in unpaid leave to one employee when they retired.
Finally, it means teams have to prepare for key team members being away more often, which necessitates cross-training and professional development. This is a big benefit long-term, as it results in a deeper and more skilled team.
The cons of mandatory vacation are pretty light. There’s not a lot of risk to running your vacation policy this way.
It does mean fewer hours available to get things done. In some cases, this could leave you stretched.
It may also result in scheduling challenges. Keeping and managing an employee vacation calendar is essential, and if you don’t effectively keep track of who’s on leave, you’ll end up with a lot of short-staffing and confusion.
Management/HR also needs to put in additional work to enforce the policy, tracking leave trends and following up with those who are slow to take time off.
Ultimately, these can be planned around, and there’s more reason to make vacations mandatory than not.
Let’s answer a few questions that pop up related to this topic.
Federal law in the US does not require companies to offer paid vacation time to employees. Some state laws may differ. But, in the US, it’s generally up to the company.
It’s a good idea to offer paid time off, whether you have to or not. Think of vacation time as an investment in the long-term health and happiness of your workers.
In the US, private (non-government) workers have an average of 10 paid vacation days after 1 year of employment. This is higher for government employees, and rises with service time.
This gives you an idea of what you should be aiming for. Ideally, you’ll offer slightly more. 15-20 days’ PTO is good for most companies, though you may want to consider increasing, depending on the average for your sector.
It’s hard to actually force employees to take vacation time.
Most mandatory vacation policies are not black and white like this. If an employee pushes back, the company won’t force them to take a vacation. They will instead softly push employees to take vacation time if they are lagging behind others.
Businesses use mandatory vacation for much the same reasons as unlimited vacation policies. For both, the idea is to incentivize people to take more time off, to boost happiness and avoid employee burnout.
However, unlimited time off doesn’t specify any number of days – in particular, no minimum time off threshold. That often means problems with employees not taking enough vacation time.
A mandatory vacation policy may also be unlimited PTO (with no upper limit).
Many large companies do mandatory vacation, or something similar. These include:
More companies today are making employee wellness a priority. And one key thing to improve wellness is ensuring employees take enough time off.
Even on unlimited PTO, which is meant to encourage people to take more time off, it’s common for employees to neglect their vacation days.
A mandatory PTO policy is a way to combat this. It’s good enough for companies as notable as Goldman Sachs and PwC.
You may want to do the same for your own business, and see if it results in a happier, healthier and more productive team.
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