How to have a successful unlimited vacation policy

Unlimited vacation doesn’t seem to be working for businesses much bigger than startups.

For example, Tribune Publishing rescinded its unlimited vacation policy only a week after it was implemented because of employee complaints. The concern? They did not want to stand out as “the do-nothing” who took too many vacation days.

Since then, commentators have declared that unlimited vacation is “awkward,” “too much of a good thing,” and “a failure.” And the criticism is valid: why provide this vacation policy if employees aren’t going to use it?

The Society for Human Resource Management notes that only 1% of companies offer unlimited vacation days. These companies include Netflix, Groupon, Evernote, Hubspot, and my own company, Capterra, an online directory of business software. And, like these other companies, we have seen nothing but success with an unlimited vacation policy. The reason why unlimited vacation isn’t working at larger companies is not an inherent problem with unlimited vacation itself—it’s a problem of culture. Create a culture where high performance is met with high freedom, and an unlimited vacation policy can scale to most major companies.

We launched an unlimited vacation policy at the beginning of last year. Before the switch, we offered our employees three weeks paid vacation (which grew to four in their third year) and 10 paid holidays. Our incentive to switch was two-fold: Firstly, we had just bought attendance-tracking software to monitor our employees’ vacation days as many growing companies are wont to do. Immediately after implementing the software company-wide, I felt the software’s inherently bureaucratic nature clash with Capterra’s startup culture. I hit the abort button, and started to think more critically about what we wanted from a vacation policy.

Americans are not good at taking vacation. A study from Glassdoor reports that American employees only take 51% of their available time off—and 15% take no time off at all. And these statistics are not good for business; studies have shown again and again that vacations are intimately tied to higher productivity, workplace morale, and employee retention. We decided to give our employees the ability to use their best judgment and take as much vacation as they decided they needed, when they needed it. Following in the footsteps of Netflix, we took a leap of faith and implemented the unlimited policy.

Our first year was hands-down a success.

We require everyone to post their days off in a company-wide GoogleDoc for the primary purposes of planning and communication. People need to know if someone else is taking a day off if they are working on something together. From this information, we could both make sure people are taking time off as well as to see if people were “taking advantage” of it. According to our own data, an employee that’s been with the company for a year or more takes an average of 24.5 days off, including holidays, and 0.9 sick days during the year. The holidays that most everybody at the company takes are New Year’s, July 4th, Labor Day, Thanksgiving (two days), and Christmas. Half the company takes Memorial Day off. The rest of the federal holidays are taken by about a third to a quarter of employees.

In other words, our employees take far fewer sick days than the nation’s average (eight days) and actually use their vacation time. I couldn’t be more thrilled. And our success can be replicated in any industry—from tech to hospitality to manufacturing—given that the industry isn’t schedule-driven (like law, education, and retail). The trick is to strike at the root: company culture.

First, establish trust between employees. At Capterra, we don’t clock our employees in and out; some employees arrive prior to 7am and others arrive after 10am, but we trust our employees to put in the time to get their work done. By focusing on “great results” as opposed to “face time,” Capterra has grown its revenue for each of its 15 years, this past year being our most impressive with over 80% growth.

Next, treat your employees like adults. Forcing employees to take vacation—or discouraging them from doing so—is juvenile at best. I have taken the position that if a policy (like unlimited vacation) applies to me as CEO, it can apply to the whole company. The expectation to be responsible doesn’t stop at the C-Suite.

Finally, realize that your employees are much more than resources; treat them as such. Allow them the flexibility to dedicate their creative energy to the company. Let them take on new projects to benefit the company—and listen when they say they need time to recharge. It may very well be the source of your next major business innovation.

Unlimited vacation policies can work for most companies that have a cultural foundation in high freedom and high responsibility. After so many wasted vacation days in this country, your employees deserve the break.

We welcome your comments at ideas@qz.com.

home our picks popular latest obsessions search