Is unlimited annual leave really the perk that it seems?

Goldman Sachs has offered it to senior bankers. But is it the benefit that it seems?

Goldman Sachs HQ in New York (AFP via Getty)

Unlimited time off work? Isn’t that just the perk to beat all perks? Better than the car-with-driver, the country club membership, eating for free every day in the executive dining room or having unlimited use of an executive bathroom kitted out like a fancy spa?

If you’re fed up with grey, drizzly London, you can jet off whenever you like if you’re a senior Goldman Sachs banker, thanks to the company’s policy of unlimited annual leave.

Tormented juniors, on the other hand, some of whom have lately been in near open revolt, have to make do with a mandatory minimum of three weeks, one of which must be a full week.

But is this perk really as awesome as it would first appear for the rainmakers, the bonus boys and girls? I’m not sure it is.

It puts me in mind of the fad for restaurants where diners were allowed to choose how much to pay – a gimmick based around behavioural economics.

When the business model was studied, it was found that while a few people put down a fiver, or even less, most tended to pay more than their meals would normally run to. They would frequently overestimate the costs, often to a considerable degree, with pressure to pay a fair price causing them to top up their bills.

The same sort of thing was witnessed with music, when people were paying for downloads in the era before subscriptions or ad-funded Spotify accounts. This held true even when bands set ranges with a minimum and a maximum price: they still tended to receive more than what would have been the face value, from devoted fans who wanted to pay the “fair” price.

With unlimited holidays, you can see the same sort of pressure working but in the opposite direction. Many will ask themselves “What’s the right amount?” and end up underestimating, just as diners overestimate the “right” bill for their dinner.

Consider, too, that Goldman is a highly competitive investment bank, where performance is closely monitored and those seen as underperforming are frequently, and unceremoniously, let go. Would you take any holiday at all? Some don’t, even with fixed allocations, especially on Wall Street.

Senior figures might even be inclined to find ways around the mandatory minimum – perhaps working from home when they’re supposed to be on leave. Maybe they could work from Val d’lsere: work is still work, even if it involves assessing collateralised debt obligations from a luxury chalet offering the best Alpine views money can buy.

It’s notable that other big companies offering the same perk – which has been growing in popularity – are also hard-charging environments, such as Netflix, LinkedIn and so on.

In fact, it took Netflix quite some time to get it right. It required a cultural change, as chief executive Reed Hastings talks about in his book, No Rules Rules.

Given the current state of Netflix, with jobs being cut and subscribers falling over themselves to get out of the digital door, now might be the time to be careful about taking advantage of the perk if you have it. You can easily see how unlimited vacation could become “no vacation” again, with the pressure firmly on.

Small wonder that the Chartered Institute of Personnel and Development is wary. Claire McCartney, resourcing and inclusion adviser for the HR professionals’ body, identifies “a risk that people with heavy workloads may end up taking less leave, rather than more” under an unlimited system.

“Inevitably this can lead to greater stress and burnout amongst staff, the opposite of what was intended,” she says.

McCartney also points out the concerns people have about piling pressure onto other people in their teams to carry the load, “making it more difficult for them to take leave”.

“Similarly, if it is only open to certain employees – for instance, senior staff – that could lead to the rest of the workforce feeling undervalued and resentful.”

It’s clear that even if the motivations behind idea this are good, the practical effects can be problematic.

In addition to protests from junior staff over brutally long hours and abuse from bosses, the banking industry has been facing some recruitment challenges. Whizz-kids interested in serious moneymaking have found similarly lucrative options, but with a better work-life balance, in places such as Silicon Valley.

If Goldman Sachs really wants to solve the problem of stress and burnout, perhaps it should tell staff how many days they will be offered and then make it clear to them – and especially to their bosses – that they should take their full allocation and not just a minimum. Then check up on it, taking steps to cut 100-hour weeks or all-nighters. Disciplining abusive bosses wouldn’t do any harm, either.