Summer Is Here, And More Bosses Are Making Vacations Mandatory

Some of Wall Street’s hard-charging Masters of the Universe can take solace from the plummeting stock market with a new perk: No limit to their vacation days. Earlier this week, headlines touted how an internal Goldman Sachs memo said partners and managing directors will now have what many employers call “unlimited PTO,” an increasingly common benefit.

Yet the memo’s more telling missive was that all Goldman’s employees will be expected to take a minimum of three weeks off, starting next year. “When you actually look historically, our people haven’t taken a lot of vacation. They haven’t taken the vacation they’ve been entitled to,” CEO David Solomon told CNBC. “It’s a marathon; it’s not a sprint.”

After a more than two-year pandemic that’s led to unprecedented burnout, unsettling mental health crises and historic resignation rates, more bosses seem to finally realize paid time off can’t just be a flashy perk that’s touted to lure workers. It may need a requirement.

“​​It’s not the policy, it’s the usage of the policy,” says Jenny Dearborn, a veteran human resources executive in the technology industry, which like Wall Street, is known for long hours, intense cultures and in some cases, an expectation that workers return to working from the office.

Advisers who consult with employers say they’re hearing more about vacation mandates, whether in the form of more closely tracked time off usage or more company-wide closures designed for everyone to take a breather at the same time. “We’re seeing a trend toward organizations trying to enable people to take time off—or by policy, requiring them to take it off,” says Carol Sladek, work-life consulting leader at Aon.

Goldman’s decision follows a move earlier this month by the consulting firm PwC to add a week-long shutdown for all employees in July, as well as introducing tech tools, such as a dashboard, that will make time off more visible to individual managers and nudge them to act if needed.

“Making sure all time off is protected, uninterrupted and that no vacation days go unused is also extremely important, so our leaders will be expected to support that happening,” U.S. Chair Tim Ryan wrote in the announcement.

If a company sets such expectations, they have to follow through, says Sladek, or it can signal they don’t really care, especially in cultures where people need requirements or incentives to simply use the benefits they’ve already been given.

“You would hope there’s some mechanism where it’s really being tracked,” and that a manager may get rewarded or penalized based on their team’s time off, Sladek says. (A Goldman spokesperson says the policy has just been implemented, but they plan to give more visibility to managers on how much time employees are taking.)

Driving the push toward time off expectations, experts say, include the under-use of “unlimited” leave programs, changes in state laws and a pandemic that has not only worsened burnout and left people concerned about overworked colleagues, but changed the optics of time off in a work-from-anywhere world.

“We started to see people take less official vacation because they were living this virtual ‘workcation’ life,” says Kaleana Quibell, vice president of wellbeing and partnerships at the consulting group Sequoia, which is based in Silicon Valley and works largely with tech companies. “Employers are now recognizing that’s fun and exciting and a change of scenery, but doesn’t solve for burnout.”

“​​It’s not the policy, it’s the usage of the policy.”

Meanwhile, recent laws in states like Colorado or Maine say employers must treat accrued vacation time as wages, says Mercer senior partner Rich Fuerstenberg, meaning it can’t be forfeited and “use-it-or-lose-it” policies may be voided in such locales. As unused vacation time rises, he also sees more companies using apps to remind people they haven’t been away in a while.

“When they’re taking time, they’re not disconnecting completely,” says Fuerstenberg. “Employers are seeing that manifest in a bunch of different ways, whether that’s reduced productivity, a growth in accrual, or increased turnover.”

But perhaps the biggest driver is how many companies have adopted “flexible” or “unlimited” vacation policies but discovered that they’re poorly designed for getting people to take time off in a global pandemic, especially in the hard-core work cultures that often plague high finance and high tech.

Such policies were initially started by many companies because they helped employers deal with accounting liabilities: If you don’t have a set number of vacation days, there isn’t a set value for how much vacation accrual has to be carried on companies’ books.

Finance departments, says Dearborn, were the ones who said “we just can’t carry this debt on our balance sheet—it’s crushing us—so finance invented ‘unlimited PTO.’” Yet after many companies “jumped on that bandwagon,” she says, “five or so years later, nobody’s taking it.”

That was especially so during the pandemic, when isolated employees needed better guidelines for how much time could be taken, and the lines between work and home blurred even more. At the last software startup where she worked, Dearborn says, which also had an unlimited policy, she tried installing a “floor” of two weeks off, but found most employees didn’t even use that much time, a pattern she says isn’t unusual among tech firms or startups. “I couldn’t get people to take it,” she says.

Stephanie Nadi Olson, founder of We Are Rosie, a network of on-demand marketing professionals, switched in 2020 from an unlimited time off policy to one where her employees must take five days off per quarter—or lose out on their full bonus. (Employees also get an extra five days they can use whenever, for a total of 25 days of paid time off.)

When the pandemic began, the small startup, which now has 60 employees, was barely a year old, and employees were telling her they were scared things would fall through the cracks or felt guilty asking colleagues to cover for them. Switching to a mandate—and tying it to bonuses— “changed our culture around time off really quickly,” Olson says. “It changed our culture around removing that guilt.”

In the summer of 2020, the photo book company Chatbooks instituted “MTO,” or mandatory time off (they’ve now stopped labeling it “PTO”). In addition to a two-week shutdown during the holidays, employees are expected to take a week each quarter. While there’s no penalty if they don’t, director of people operations Madison Bohannon says she tracks each department at the 200-person company and follows up with managers, sparking conversations like “do we need to add someone to the team? Do we need to spread things a little differently so that you have the ability to unplug?” she says. “No one should feel like they can’t take a week off of work.”

Reardon believes the more that big companies like Goldman Sachs talk about minimum vacation time expectations, the more other companies may follow. “That’s a very big deal that they have put a stake in the ground,” she says. “It gives other people sort of permission to do what they thought was right the whole time.”