The Trouble With Vacation Time

Who owns vacation time, the company, or you?

In Did You Miss Out on Vacation This Year? You’re Not Alone, Noam Scheiber describes the impact of Covid-19 on business policies regarding ‘carrying over’ — or losing — unused vacation time at the end of the year:

Many companies that already allow employees to carry vacation days into the next year — like Goldman Sachs (generally up to 10) and Spotify (generally up to 10) — have not felt the need to change their policies.

The same is true for some companies that pay workers for their unused vacation days.

Neither General Motors nor Ford Motor, whose hourly workers can cash out unused vacation days at the end of the year, is making changes this year.

But many workers may find themselves unable to take vacations that they postponed: Salaried workers at both automakers ordinarily lose unused vacation days at the end of the year without compensation.

Other companies have taken steps that could defuse a potential human resources headache and, they say, benefit their work forces in difficult times.


Several experts said a philosophical question loomed over vacation benefits: Is the point to ensure that workers take time off? Or are vacation days simply an alternative form of compensation that workers can use as they see fit, whether to relax away from the job, to supplement their income or to drag around with them until the end of time, as a monument to their productivity?

An employer’s policies can reflect its views on this question: For all their drawbacks, use-it-or-lose-it rules can help ensure that workers take time off, said Jackie Reinberg, who heads the absence and disability practice of the consulting firm Willis Towers Watson. By contrast, rollover and cash-out options imply that vacation is an asset they are entitled to control.

Let’s ask the question a different way. Is vacation time an incentive for us to take time off to recharge and reduce stress, an effort like underwriting gym memberships? A wellness policy companies adopt to attract candidates? Or is it more like an obligation to pay salaries for workers a certain number of days per year when they are not working? In the former case, companies can unilaterally determine the policies involved, just like they can change the brand of coffee served in the cafeteria. But in the latter case, workers should be able to turn those days into cash, since the pay would be theirs if they had gone on vacation.

The missing piece in this discussion is the role of government, which Scheiber finally gets to:

A few states, like California and Montana, essentially codify the property-right view of vacation by outlawing use-it-or-lose-it policies. (Companies with use-it-or-lose-it or strict rollover policies must exempt workers in those states.)

Such laws protect workers from effectively being deprived of vacation days that are difficult to use during the year only to have them expire at year’s end. But these laws may also subtly discourage vacations by making them easier to redeem for money or put off indefinitely.

Another clear example where federal policies establishing baseline minimums for vacation time would counter the imbalance of power inherent in the employer/employee relationship. In particular, the decision to establish paid leave for hourly employees in low-paid jobs should not be left up to employers. National minimums are needed, just as we establish minimum wage rules (although our minimum wage should be set at a level that allows people to live above the poverty line). But avoiding the issue allows companies to finesse the situation, and to treat paid leave as a perq they unilaterally choose to offer workers, rather than as an obligation to pay up.

originally published on Medium.