Why we cancelled our Unlimited Holiday policy

Some context, as I am writing this article now I understand and I am happy with the change, unlimited holidays sounded like a dream come true when I joined Circular. Now? I understand and I am happy we no longer have unlimited days.

So, what happened? Why did we have an Unlimited Holiday Policy, what was the reasoning behind it and why was it changed?

Why did we have an unlimited holiday policy?

Teams that can disconnect and rest, on average outperform teams that didn't to the same degree. It's Pretty straightforward and obvious that someone who is well rested, feels comfortable in the workplace, with their team and works in a healthy environment will be happier and (as a rule of thumb) perform better than someone who doesn't. We wanted to foster a healthy space with enough time for rest, and be people-driven first, after all, Circular is all about collaboration and cooperation!

The reasoning for the unlimited holiday policy was then based on two things: letting people choose the amount of time they need to come back rested and refreshed and giving them the freedom to choose their time off according to their needs, no questions asked.

How did it work out? Not quite as well as we expected but not for the reason most people criticise these types of initiatives. It wasn't that we were taking too much vacation and performance was going down, quite the opposite, people were taking less vacation than the stipulated norm across three countries.

What? Less vacation? YES! The average number of holidays in Circular during 2021 was 24 days (the person who took the least amount of days took 21 and the person who took the most, took 28.5 days).

Why are people taking fewer vacations when they don't have a limit? Good question! we are getting there bear with us!

Last June we had our offsite in sunny Toro, and among the many team-building activities and recaps, we had a "Stinky Fish Session" which consists of the team bringing forward things that, well, Stink and would like to see changed.

During this session, the Unlimited Holiday policy came up enough times that a discussion was opened and the policy debated. So what were the main criticisms of it?

What insights did we gather from the Unlimited Holiday Policy?

For the main part, performance stays the same, employee satisfaction when joining a company with unlimited holidays sounds like a dream but it also created something which dawns on everyone sooner or later: Unlimited holidays lead to unfairness and bias in terms of the number of holidays that the team request based on their personality, culture, and seniority.

This poses a great challenge, creating a Holiday Policy that is 100% fair is hard, but it is even harder in distributed teams. Different countries have different regulations and our team is distributed across 4 countries, all with their minimum number of days that can be taken.  

Furthermore, we researched companies that have the most generous vacation packages in the market (We looked at Cabify, Typeform, Packlink, and Payfit among others) and they all on average have 30 days per year of vacation.‌

Funnily enough, when the people team communicated that the policy was going to be changed, there was an outcry! Why? because there was a misunderstanding (the outcry was very short-lived).

This misunderstanding was rather fascinating, the Unlimited days were thought of as something key in case one had a personal event that would require time off work. While the number of days we could take off has been limited, time off for personal reasons is another thing completely, and something that hasn't changed.

The New Holiday Policy:

With the findings at hand, we wanted to create a policy that truly achieved the purpose we set for it: Have employees take enough time to rest, disconnect, and find a pleasant experience when requesting time off.

So what does the new policy consist of and how are we going to achieve our purpose?

• We get 25 days of paid holidays per year no matter where one is based.
• We have the possibility to enjoy up to +5 extra days of paid holidays per year if needed, no questions asked.
• Paid holidays are on top of bank holidays.
• Managers are responsible that their teams taking at least 25 days of paid holidays.
  At least 7 days of holidays will need to be taken during the low period: Winter (from 15 of December to 10 of January), Summer (from the 1st to the 31st of August) or Spring break (depending on the year between March or April).
• Carryover of the non-taken days only applied for the 25 paid days.

Before we finish, it's important to mention that we all like to talk about changes in policy and how great they are. Yet it is surprisingly common to forget that the policy itself isn't important, it's how it's applied and what is done around it. That is why now managers have a responsibility to ensure their teams take their 25 days, having ongoing in-house trainings (like how to best do handovers when going on vacation).

One of the last things we also wanted to make sure was communicated (and the people team did a great job communicating it) is that the Circular culture and values remain the same - we are human and we care for others.

Conclusion

Having unlimited vacations can generate choice overload biases and generates a lot of insecurity and reticence among employees when asking for days. A combination of the lack of guidelines on how many days can be taken, workloads generated by handover generated an environment where teams took less vacation than normal, and generated a fair amount of doubt and stress among employees.

Overall it seems that giving more vacations than the average generates a much better employee experience than unlimited holidays, and having some rules to how to ask for them and a clear expectation of how and when can be asked incites people to take their allotted time.

In any case, these are early stages, we will be publishing an update on the policy in January 2023 and an update on the impact of the policy on employee satisfaction.