In recent years, time-off policies have taken center stage for businesses when recruiting and hiring new employees. A compensation package is no longer defined by a salary and healthcare alone, but by the additional benefits offered to keep employees motivated and productive. This is largely because millennials, the largest group in the workforce, are two times more likely to consider paid time-off as the most important benefit when compared to baby boomers.

In this month’s post, we’re going to explore the following about time-off policies:

  • Why a time-off policy is important
  • Building a successful time-off policy
  • Trending time-off policies
  • Implementing time-off policies

To help us learn more, we partnered with Stephanie Wagner from Tulip, a provider of mobile application focused on empowering workers in retail stores. Partnered with Apple, Tulip’s mission is to harness the power of the world’s most advanced mobile technology to deliver simple-to-use apps for store associates to look up products, manage customer information, check out shoppers, and communicate with clients. Tulip has grown from a team of 15 employees in 2013 to now over 150 in 2019 and has employees based out of Canada, USA, and Europe.

A Brief Background

The concept of a time-off policy originated in 1910 when President William Taft proposed to Congress that every American worker should receive 2 to 3 months of paid vacation. The law never passed in the United States, but other nations like Sweden and Germany passed similar laws at the same time.

The United States is one of the few countries that does not have a national paid sick leave policy, but the average American private industry worker in 2012 still receives 10 days of vacation, 8 days of sick leave, and 9 holidays for their first year of services1 . Yet, nearly 55% of American workers left vacation time unused in 2015, perhaps a result of time-off policies.2

Why Is A Time-Off Policy Important?

About 63% of employees view paid time-off as one of the top three benefits that influence their job satisfaction.3 Time-off policies can positively impact a business when constructed and implemented correctly.

  • Increased Productivity: Taking vacations increases creativity at work, which can lead to innovation and new ideas from your employees. It’s important for employees at young, growing companies that don’t follow a traditional 9-5 workday to take time-off. This allows them to return to work with a fresh mind and perspective, strengthening their overall production.
  • Happier Employees: Did you know that nearly 85% of employees say that they are happier at work after a vacation?4 A good time-off policy allows employees to decompress and focus on their mental health, physical health, and personal interests. As Tulip’s Employee Success Manager, Stephanie has learned that a work-life balance is integral to helping employees focus on what makes them happy, whether that’s spending time with family and friends or volunteering for an important cause.
  • Develop Leaders: When one of your team leads takes a vacation, it presents an opportunity for another employee to take initiative. This helps an employee understand whether they may be ready to lead a team or what skills to acquire before taking the leap.
  • Recruiting: Employees are likely concerned about work-life balance similar to how they’re concerned about salary. In order to strengthen your recruiting. it’s important to cater your time-off policy to the demographics or type of people you want to attract. Advertising an attractive time-off policy could help secure a qualified hire.

Building An Attractive Time-Off Policy

A time-off policy that helps to achieve the benefits listed above looks different for each company. Tulip aims to help their employees achieve a work-life balance by providing adequate time for their mental health, physical health, and personal interests.

If you’re considering building or revamping your time-off policy, the following factors can help.

  1. Think about the logistics. How many days off do you want to offer? Do employees receive a different amount of time-off based on their tenure at the company? Is unused time-off able to be carried over to the next year, and if so, how much? If you decide to go with an open or unlimited time-off policy, how many days are appropriate for employees to take off?
  2. It’s important to do the proper research. In some countries, employers are required to offer 2 weeks vacation if an employee has been with the company for less than 5 years and if they are there for longer, then they are obligated to offer 3 weeks. If the proper time-off  is not offered, the company can be subjected to a fine from the government. Additionally, it’s a good idea to inquire about other offers an applicant is receiving in order to build your compensation package. If you’re trying to recruit the best candidates, this will help you stay leveled with the competition.
  3. Remember to consider the type of people you want to attract. If you want to build a diverse workforce, create a time-off policy that caters to all of your employees, no matter their age or location. If many of your employees have younger children, maybe you offer the same holidays as the local school district. This way, your employees have vacation the same time as their children and don’t have to worry about childcare.
  4. Your time-off policy should be created in sync with your overall compensation package. You could make a more competitive offer if you’re also taking into account time-off and perks like free lunch and gym memberships.
  5. Consider the flexibility of your working environment. If you decide to let people work from home and make their own hours, this could play into how much time-off you offer. For example, an employee who is bound to a 9-5 schedule may have to take time-off for a doctor’s appointment but an employee who controls their own schedule won’t have to.
  6. Don’t struggle with your time-off policy by neglecting the global experience. You can scale your time-off policy based on location.  For example, companies in the United Kingdom have 25 national holidays and companies in the United States typically have 7 to 10 national holidays, changing the employee experience per location. If you have offices across the world, alter your time-off policies per office, and market the policy accordingly.

Trending Time-Off Policies

Time-off policies is a very popular topic in HR right now. We researched some of today’s most popular time-off policies and how they’re working (and not working) out.

  • Unlimited Time-Off
    According to SHRM, an “unlimited time-off policy counts on the fact that employees will manage their own time well because it’s in the best interest of their careers to do so.”5  This policy also helps with recruiting and reduces the chance of employees coming to work sick and spreading their germs.

    On the other hand, many companies have reverted back to a traditional accrual-based time-off policy. We asked Stephanie if she knew why: 

I’ve noticed that while some companies do offer unlimited vacation, taking time-off is actually frowned upon. Additionally, businesses have found that it’s their underperformers who end up taking too much time-off and their overperformers who stay at work.

  • Vacation Subsidy
    If you truly believe that your employees perform better when a work-life balance is achieved, a vacation subsidy could be the answer. In this instance, you would offer a subsidy for your employee’s vacation, but your employee only receives the money if a vacation is taken. By paying for an employee’s vacation, you make it clear that time-off is not only allowed, but encouraged.
  • In Cohesion With Business Cycles
    You can build a time-off policy that works with your business cycle. If your optimal selling time is in the winter and a holiday shutdown would hurt your revenue goals, you could implement a summer shutdown or encourage PTO in seasons when your sales are generally slower.
  • Paid Time-Off For Volunteering or Professional Development
    Your time-off policy can incorporate social responsibility and help employees master their skills. In order to do this, offer time-off and a stipend for employees who want to take courses and workshops for professional development
  • Four-Day Work Week
    A business in New Zealand recently tested a four-day working week where employees worked for four eight hour days but received payment for five days. This experiment was designed to encourage more of a work-life balance, and it worked. About 78% of employees felt they were able to successfully manage their work-life balance, up from 54% during the five-day work week, and stress levels decreased by 7%. 6

Implementing A Time-Off Policy

Implementing a time-off policy is all about communication, which is why Tulip communicates their policy year-round. Each employee is notified about the amount of time-off they have remaining on a quarterly basis, sending the message that work-life balance is always encouraged.

Communication is key. It’s important to have clear policies that don’t leave anything to the imagination. The clearer your time-off policy, the more likely your employees are to use it,” said Stephanie.

If you’re invested in communicating your time-off policy to employees, you can create a monthly report for managers with each of their direct reports’ time-off. This is something that Tulip practices, in addition to reaching out to each employee in October to ensure that time-off is scheduled for the holidays.

A Time-Off Policy Matters

Compensation isn’t the only way to reach employee satisfaction, and it doesn’t seem that this will change any time soon. Different benefits and perks play a large role, such as time-off policies.

Keeping employees happy with a time-off policy that helps them create a work-life balance can yield several positive returns for your business–retention, productivity, engagement, and better employees.

  1. https://www.patriotsoftware.com/payroll/training/blog/looking-average-vacation-time-determine-businesss-policy/
  2. https://projecttimeoff.com/press-releases/americans-waste-record-setting-658-million-vacation-days/
  3. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2016%20SHRM%20Employee%20Benefits%20Full%20Report.pdf
  4. https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2016%20SHRM%20Employee%20Benefits%20Full%20Report.pdf
  5. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/unlimited-pto.aspx
  6. https://www.theguardian.com/world/2018/jul/19/work-less-get-more-new-zealand-firms-four-day-week-an-unmitigated-success