Site icon Building Customer Driven SaaS Products | Jason Evanish

Why Unlimited Vacation is a Bad Idea for Startups

One of the really cool things about being a startup is that you can make your own rules.  There is no HR department to try to make you act all “corporate” and instill strict rules and guidelines or even have an “employee manual.”  There is no doubt that this added freedom creates much of the innovative culture that drives a startup and attracts great employees.

One common area to experiment in for a startup is with the vacation policy. Talking to founders, I’ve heard startups use the entire spectrum from no vacation to unlimited vacation.  Today, I’d like to examine the unlimited vacation policy and why I think it may not be the best idea for startups.

There are really just 2 sides to this issue I see: how your best and worst employees handle it.

Unlimited Vacation takes advantage of your best employees.

I’m a workaholic. So are many other startupers. Especially for an employee punching above their weight class, there can be a lot of pressure to constantly move the ball forward and make progress. That can mean taking very few breaks, and risking burn out.

When you have unlimited vacation, there is no finite number. That number feels very foreign and it’s hard to understand when you are allowed to take time off and how much is appropriate.  When you become a veteran entrepreneur, the concept may make sense and be easy as you’ll know when you should take time off; you fully appreciate the concept that a recharged version of yourself is much more productive than the borderline exhausted version of you slogging along for months.  However, when you’re new, knowing the actual amount of time you’re allowed to take off can really help you not feel guilty taking time off when you need it.

Unlimited Vacation is a dangerous option for bad employees.

What do you do when one of your employees wants to take time off repeatedly in a short amount of time or a time that is far from ideal for your startup? How do you rein that in without conflict? When you talk about issues around “wrongful termination,” it’s a hard argument to say you’re firing someone for taking too much “unlimited vacation.”  This can cause all kinds of conflict in your company as you can have resentment between employees and frustration for both parties; those taking the vacation think they’re merely exercising the rule as written and those working hard and not taking breaks see it as abuse.

So what’s the solution?

Have an open vacation policy with a finite number of vacation days. 

What does this really mean? It means you shouldn’t have to apply for vacation days, but there should be a specific number you get each year. That finite number means employees can’t abuse their freedom to take time when you need it, but you can also tell your workaholic employees, “Hey, you have 90% of your time still unused…take it!”

Obviously vacation and sick policies are a complicated issue at startups. This is just one piece of a larger question about how to get the most out of your employees while keeping them happy, healthy and motivated.

Have you worked at a startup with Unlimited Vacation or another creative vacation policy? What were the pros and cons?

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