Business Leaders: Don’t Fix One Mistake By Making Three More

Turnover can be costly. The hiring process, training someone new, and productivity hit has obvious bottom line impacts. But there is an often-ignored cost when turnover occurs.

The check that the company writes to the departing employee for unused vacation may not even register on the scale of major costs, but some companies are finding that it should.

There is a $272 billion liability sitting on the balance sheets of American companies, amassed over years of employees rolling over unused vacation time. Perhaps most striking is that the number is up 21 percent since 2015 when the vacation liability stood at $224 billion. The per employee liability is $2,226, up from $1,898 in 2015.

If your mental calculator is whirring right now trying to calculate your company’s liability, you may be tempted to take a hatchet to your vacation policy, eliminating rollover or payouts. Don’t panic. There is a way to get that liability down without embodying Charles Montgomery Burns.

 

  1. Consider changing your approach, not your policy. A lot of Americans are skipping out on vacation because they fear the consequences of going away, even if those consequences are imagined. Many employees cite concerns that they’ll be replaced or look less dedicated as reasons to pass on time off. Couple that with the two-thirds of employees who say they don’t hear anything about vacation from their company, and you have the perfect conditions for a negative vacation culture to flourish. By enlisting company leadership and managers to simply encourage vacation, your employees will not only be more likely to take the time, they’ll feel more valued. Ultimately reducing your liability and earning their loyalty.
  2. If you are making a change, do not make it about the costs (even if it is). Vacation is intensely personal to many employees. It represents something that is purely theirs. And for many employees, it represents a safety net. The vacation stockpile is often viewed as supplementary retirement income or a fail-safe if they are let go. Reducing or removing that option without the appropriate warning and communication will be perceived as a move purely in the company’s interest. Considering the employee perspective and introducing any change framed with their interest in mind will lessen the potential for negative reception. Remember the point of a vacation policy in the first place: to give employees a chance to recharge. It doesn’t mean it will be a welcome change, but it may reduce employee ire.
  3. Be prepared with a clear transition plan. People don’t like change—period. But when change is required, give them clear information far in advance so that they can prepare for what’s to come. Ideally, phasing a new program could be done over the course of a few years. The employees most affected by a policy update will be your longest-serving, and they may feel unduly targeted without time to absorb the change. If waiting a few years feels too long, you could also consider an incentive to expedite getting that unused vacation off your books.

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