Should You Pay Your Employees To Vacation?: It Might Make More Sense Than You Think

Should you pay your employees to do nothing?

More specifically should you pay them to go on vacation?

According to Yahoo Finance Denver-based tech company FullContact does just that. Employees get paid to take a vacation every year - if they unplug from technology during the trip.

And the last point is interesting - the payment is contingent on the employee doing what the employer wants - unplugging - which may provide a host of benefits to the employer.

So let’s dig into it. Should we pay our employees to do nothing?

Benefit 1: Employee Morale

One of the best things about vacation is that it, generally, makes people happy. The CEO of FullContact told Business Insider that he sees people happy and more ready to work when they come back from vacation.

And that makes a lot of sense. I know from my experience, and from talking to others, that many of us just enjoy getting away. Somewhere new with new timelines and different experiences.

And in the long-term motivated employees should pay dividends - better innovation, better and better customer service.

Most companies could definitely use this.

Benefit 2: Retention

Many employees are motivated by time off. I remember interviewing at a company that had paid sabbaticals. One of the employees was talking about working up until their next sabbatical. I believe this company was giving people 6 months off every 5 years. So a lot of the employees were counting down to the next break.

I didn’t end up working for that company but I bet a lot of employees left right after their sabbatical. But I also bet a lot of employees, once the got back, started their count-down to the next sabbatical. And I bet retention was very high for employees getting close to their next sabbatical. Who is going to leave if your put in 3 years and only have 2 years to a 6 month break?

And I bet this same thinking works for annual breaks.

Many of us love our work but get burned out by all of the things we have to do that are not our work: paperwork, internal politics, internal policies and just plain personalities of co-workers.

Knowing a break is coming might smooth all of this out.

All in all I bet recruiting costs are lower for a company with a policy to pay employees to vacation - we’ll jump into that more later.

Benefit 3: New Ideas

Many of my best ideas come on road trips or vacations.

I actually make sure I have a few road trips scheduled each year because I think of so much while driving. You’ll see me pulled off in random parking lots writing notes as I take driving breaks.

The Do Business Effectively(?) Pyramid was born as it popped into my head while driving. I still use this when consulting to help clients figure out where they need their next training.

Yuval Harari, noted author of Sapiens and admired by tech companies, is noted for taking long sabbaticals to think.

There is something about the deep work of thinking. And vacation seems to be a big one.

Benefit 4: Internal Controls

In the Business Insider article the CEO of FullContact admitted what might be the biggest benefit of the employees fully disconnecting: the company can operate without them.

This is great from an internal controls standpoint because the company will expose its failure points as employees cycle on and off of vacation. Should one employee be doing too much or know something that other employees don’t the employer is bound to find out during the vacation time.

This is also good for exposing fraud which we’ll cover in a bit.

But an unexpected bonus for operations for letting employees take time off.

Benefit 5: Less Dependence On Individual Employees

As a sister to internal controls a company that can actually let employees fully disconnect has less dependence on any one employee.

This is good for the company but not always so good for the employee. I often say in negotiations that the one that can’t walk away loses. This stacks the deck for the employer as the vacation time will prove to management that the company can go on without the employee.

But can the employee move away so easily? Probably not.

A sneaky hidden win for management but the company that gives paid, fully-disconnected, vacations is also making it easier to replace employees and potentially thereby avoid losing wage negotiations.

Benefit 6: Fraud Detection

We talked about internal controls before and not being dependent on any one employee early in this article. And this points to another great benefit of employees taking time off: fraud detection.

Often when frauds are happening within a company the employee needs to be there to keep things covered up. This might be something as simple as paying the same invoice twice to two similar vendors (one of whom is fake) or more complex like fake investors or hidden bank accounts.

But what happens when the double invoices come in when the fraudster’s co-worker is covering the desk? Questions likely arise which cannot be quickly dismissed.

Similarly if the fraudulent employee is fully disconnected from technology they cannot manage hidden bank accounts or interact with fraudulent investors that might be calling the office.

You learn studying for the CPA exam that vacation time is a great way to expose fraud. And paid vacations institutionalize this protection.

Benefit 7: Hiring

I bet hiring is much easier for a company that actually welcomes vacation. Many talk about it but once you are hirer they tell you it’s not normal to actually take vacation time.

In a company with a strong paid vacation policy you are showing potential employees they can actually take vacation.

I know this was huge for me back when I was interviewing with the company with paid sabbaticals. I wanted to work to that goal.

I bet recruitment is a lot easier.

So should you?

So should you, as a business owner or leader, implement a pay for your employee’s vacation policy?

The truth is there are a lot of reasons for it. You can see there are at least 7 major benefits (if I missed any please comment or write me).

The downside is, of course, the cost. This is a very expensive program. In industries that are dollars for hours (which is where I have spent most of my time) it means you have to bank some money to pay for the vacation and time off. This should be doable but it will mean an ever greater spread between the hourly rate you pay your employees and what you bill your clients - and you’ll end up having to show employees why. Also, in theory, you might not be able to pay your employees as much, per hour, as a competitor.

But if you can get your economics to bear it this might be a great way to Do Business Differently? and create a different culture.

I would love to hear your thoughts on this in the comments.

NOTE: This article is a piece develop a small portion of the content of the book tentatively called The Journey: Finding Your Place From Entrepreneur to CEO being co-authored by The Our Shawn McBride and Ann Gatty. If you want updates on the book including the possibility of joining our release team or getting one of the first copies please join our mailing list here.

DISCLAIMER: This article talks about legal issues. I am a lawyer licensed in multiple US jurisdictions, but I am not your lawyer unless we have signed an engagement agreement. Please view this material as educational and consult counsel you have retained for advice on your specific facts and circumstances. Do not rely on these general statements as legal advice.

By: The Our Shawn McBride, is the business nerd and long-time business attorney that focuses on changes of ownership in businesses. He works with business owners that know their business is about more than themselves to get ready for their future within the future of business through keynotes, training and personalized solutions. In furtherance of this he hosts The Future Done Right(TM) Show where he collects, digests and gives lessons and insights on The Future of Business. If you want regular content on the future of business subscribe to get new blog posts from us here.

You’ll quickly notice his unusual suits which he uses open the conversation of how businesses should Do Business Differently?.

The Our Shawn is based in DeLand, Florida (between Orlando, Florida and Daytona Beach, Florida) and Dallas, Texas where he keeps offices. You can also find Shawn on webinars or traveling nationally or internationally for speaking engagements.

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