Time for a change: for a loyal workforce, just add more vacation time - Focus on Benefits

HR Magazine, August, 1999 by Andrea C. Poe

Knowing what employees want and providing it is the key to strong retention and recruitment. This has never been more true than now, when at least 65 of the country's top 99 metropolitan areas are reporting unemployment rates below 4 percent, according to Manchester Partners International, a workforce consulting firm in Bala Cynwyd, Pa.

With a drum-tight labor market, employers have to be equipped with policies that grab employees' attention. While competitive wages help, recruiting and retaining a committed workforce takes more than cash. It takes time. Literally, it takes vacation time.

Recent surveys point to an increasing demand by employees for more vacation time. The newly released "America @ Work" study based on 1,800 interviews by Chicago-based Aon Consulting found that employees rank paid vacation the fourth most important benefit after medical insurance, pensions and matched retirement savings plans. The results mark a dramatic change from 1995 when vacation ranked 10th among the top 23 benefits.

"It has to do with the fact that people are spending more time on the job," explains Ray Segers, survey research manager at Aon Consulting's Loyalty Institute in Ann Arbor, Mich. "While Americans are willing to do that, they will also, at some point, need some time off."

While benefits surveys make workers' needs clearer, there is still a disconnect in what employers actually give. Hewitt Associates, a human resources consulting firm based in Lincolnshire, Ill., found that eight out of 10 employers cling to the standard two-week vacation policy. After five years of service 70 percent provide three weeks, and it typically takes 15 years to earn four weeks, the report indicates. The 1999 Society for Human Resource Management Benefits Survey revealed similar results, with the average vacation time after one year of service coming in at 9.9 days and topping off at 20 days for 20 years of service.

It is a different story for the public sector, which has historically been more generous with its vacation packages: 13 days for the first three years, four weeks from three to 15 years and five weeks and a day for more than 15 years. However, the Hay Group, a Philadelphia-based consulting firm, reports that private enterprise is catching up, albeit slowly. "There's been very gradual improvement," says Michael Carter, vice president of the Hay Group.

The private sector is coming around to the realization that pay and cash benefits are not drivers of commitment. "That's not what motivates people day-to-day," says Segers. "Quality of life factors, like vacation time, are what people think about while they're at their job. I mean, how many people do you know sit around thinking about their 401(k) while at their desk?" And while salary is important when deciding whether to take a job, it's not what enhances performance once in the job, Segers maintains.

Aon's survey found that when workers were asked to name the top 10 things employers can do to enhance workforce commitment, increasing salaries didn't even make the list. But understanding employees' need for time off with their families topped it.

A Perk that Works

Workers no longer are afraid to move from company to company in search of a work and family balance. A generous vacation package alone may not keep employees from ever leaving, but combined with other work and family benefits, it may keep them on the job longer. "You've got to be realistic. You can't expect good employees to stay around forever, but you can try to get them to stay longer," Segers says.

"While someone isn't likely to stay at a company only because of a liberal vacation policy, it can be a piece of what helps keep them there," Carter agrees. "The tighter the market gets, the more every little bit is going to help."

Offering generous paid vacation time worked for Kingdom Inc., a direct mail marketer in Mansfield, Pa. The company recently upped its vacation policy in an effort to stay competitive in a tight labor market.

"Because we're a small company with 250 employees our salaries can't compete with big companies. So we wanted to enhance our benefits package," says Shari Heffner, PHR, HR manager at Kingdom. "What we can't offer in compensation we can offer in extras like additional vacation time."

The new policy runs like this: Full-time employees receive an additional week's paid vacation, and long-term employees receive several additional days. After six years, an employee is entitled to three weeks paid vacation as well as an additional three days off. The company also has implemented vacation pay for part-time workers, who now accrue paid vacation days at half the rate of full-time workers.

"We've had a phenomenal response," raves Heffner. Not only has the company received positive feedback from its staff and attracted new employees, but Heffner says that former employees have called to see if they could come back. This kind of success has prompted Kingdom to commit to further expansion next year. "We're definitely going to become even more innovative in this area," she maintains.