Why more annual leave is better for your company

Molly Johnson-Jones, CEO and Co-founder of Flexa shares her thoughts on why attitudes towards annual leave need to change.

10th Apr 2024

As the days get lighter and longer, summer is almost in sight here in the UK. Like most workers, lots of the team here at Flexa will be taking well-deserved breaks over the summer months, whether that means long weekends with friends, family holidays, or just taking a half day here and there to enjoy the (hopefully!) lovely weather. But, unlike most workers, Flexa employees don’t just get standard public holidays off; nor is our team’s downtime limited to the days they have in their annual leave allowance. Instead, alongside both bank holidays and annual leave, the whole of the Flexa team will also close their laptops for the entire last week of August – with their 35-day annual leave allowances intact, and a second, week-long company shutdown to look forward to between Christmas and New Year. Shocked? You’re not alone. 

When I tell fellow US business leaders about our annual leave policy, they often marvel at its ‘generosity’. I’m well aware that while this is the opinion of many, there are also many others who would deem our approach ‘unproductive’, or assume that it is ‘bad for business’. And I can understand how these misconceptions arise. My company’s vacation allowance differs dramatically from the US norm, where the average US worker gets just 11 days of paid time off a year. But when you compare the American approach to annual leave policies and outcomes across Europe, it becomes clear that the US way is not the only way. Nor is it necessarily the best one. 

European workers are entitled to around 20-25 days of vacation each year. In the UK, statutory annual leave entitlement (paid time off, which can include public holidays) rises to 28 days. By contrast, US workers have no legal paid vacation entitlement at all – yes, you read that correctly. This disparity is wrapped up with cultures of presenteeism being rife across the US, seeing output measured against the total number of hours staff work, and risking vacations being seen as disruptive or a ‘perk’. So it’s unsurprising that a third of US workers feel unable to take time off. And it follows that one in four Americans rarely or never take their full annual leave allowance. 

Yet, you need only look at productivity levels across Europe and the US to see the ‘hours equals output’ myth fall apart. A recent ranking of the most productive OECD countries puts the US in 12th place. All of the 11 countries which rank higher - including Norway, Luxembourg, Ireland and Germany - offer workers significantly more vacation days than US businesses. Essentially, European employees tend to work far fewer hours than American employees, and tend to be far more productive for it. Why? Only teams who are physically and mentally well are able to work at their best – and it’s clear that giving staff sufficient time off to rest and recharge improves employee wellbeing and performance.

In Sweden, where all employees are entitled to 25 days of annual leave per year, employee wellbeing rates are significantly higher than in the US, according to a new McKinsey report. Research also shows that taking time off can reduce rates of stress and absenteeism. Plus, British companies whose teams have moved to four-day working weeks (which give staff a paid day off each week, in addition to weekends and their usual annual leave allowance) report reduced burnout and increased revenues at the same time. 

Sufficient annual leave allowances can’t possibly be seen as ‘generous’ (as my US peers suggested) when businesses have so much to gain from healthy, thriving teams, and so much to lose through the alternative. This isn’t limited to the cost of lost productivity, either. Businesses whose staff become burnt out and are forced to take sick leave face the added expense of wages owed in overtime to staff who are needed to fill in. Regardless, giving staff the time off they need to stay well isn’t a question of generosity. It's about employers fulfilling their duty of care to employees and doing the right thing. And it’s urgent that they do, given how much workforces are struggling right now. 

Over three quarters of US workers have reported experiencing burnout, and US employees are also amongst the most stressed in the world, according to Gallup’s recent report. Bosses say they want to tackle this, but truly changing this picture will take more than increased annual leave. Staff must first and foremost be empowered to maintain a healthy work-life balance every day, not just when they’re on holiday. Giving staff the option to work from home and offering flexible start and finish times can help hugely with this, as can many other kinds of flexible working benefits. Next, staff must feel empowered to use their annual leave allowance in full, and to be able to fully switch off when they’re away. This should be encouraged by the role modelling of senior leaders. Company shutdowns – which are baked into the cultures of countries like Norway and France – can help with all of this. 

Firstly, company shutdowns ensure that even staff who usually find it difficult to step away from their laptops take a good break, rather than just the odd day off. Secondly, promoting company-wide breaks helps empower staff to take more time off more regularly, knowing that value is being placed on their performance, not the number of hours that they work. Thirdly, staff can more easily switch off when they know that their colleagues aren’t still working in the background, sending emails that they’ll have to catch up on when they return. And this ‘standstill’, where no one in the company is working for a few days, doesn’t impact businesses in the way you might assume. 

Take Norway as an example. The majority of Norwegians take time off work in June and July, during the 4 weeks of ‘fellesferie’, and yet the country still outranks US productivity levels. Norwegians are also consistently ranked amongst the happiest people in the world. Coincidence? I don’t think so. 

This isn’t to say that every business can or should introduce 35-day annual leave policies or company-wide shutdowns. Every company is different. For some businesses, like mine, company shutdowns are part of what enables us to work well and stay healthy. Flexible working benefits are another huge part of this, and can supplement annual leave policies at companies that can’t offer bi-annual shutdowns to create happy, healthy and thriving teams.

Vacations aren’t a silver bullet to fix mental health crises, and they never will be. But it’s clear that attitudes towards annual leave and preconceptions around productivity need to change where staff feel unable to take time off and are burning out as a result. European approaches might just offer some inspiration for our American colleagues – if business leaders also allow themselves some time to pause for thought this summer. I’d highly recommend it.