What Would Henry Ford Have Thought About Unlimited Paid Time Off ?

US organizations are being creative to attract and retain talented staff.

The latest measure is unlimited paid time off – UPTO - also known as ‘open leave,’ says the Society of Human Resource Management.

The idea of UPTO is to offer staff as much leave as they need for illness, personal reasons, or holidays, such as what Goldman Sachs has for their workers. Even Microsoft has introduced it as a lure to new US staff who started work from 16 January.

In 2021, just one in 25 US firms offered the benefit; now, it’s the norm in 20% of firms.

But I’m not sure UPTO translates well in all situations.

I’ve heard employees – at various level in organizations – have trouble taking time off when they choose. They’ve built loyalty to their organization and peers and can see the negative impact if they’re not there. Sometimes, it’s not an effective way to manage their workload as it will still be waiting for them on their return. Unlimited PTO isn’t the quick fix to the scarcity of available, talented workers or their quest for work-life balance.

And that’s tough if you think about how many hours we tend to spend working. According to the OECD, we work 1,734 hours annually in the US, the highest of all G7 countries. Pre-pandemic, two weeks’ holiday was the average, some countries four weeks’ leave is standard.

Here’s a provocation from Bryan Lufkin, writing on the BBC’s news site: “Is this recently introduced perk [open leave] the shiny new toy workers have wanted all along – or is it the gift no one asked for?” He argues the key driver is flexibility, including the option to work from home. It’s not just work-life balance but respecting the boundaries between their interests, health, family, intellectual, and emotional spheres.

So, when you hear about offers of doubled wages or unlimited time off, it’s worth scratching below the surface for details.

Work perks: what’s on offer

Companies are using several other innovative ways to attract the best staff. They may offer:

• Highly competitive salaries (helps deal with the impact of inflation)
• Job offer the day after you apply and without an interview (Home Depot)
• A guaranteed 32-hour work week, which means employees can work four rather than five days
• Fourteen weeks of parental leave for birth, adoption, or foster care
• Up to 90% medical insurance coverage
• Discounts on insurance for dependents, a partner, including one with a disability
• Dental, fitness, optical, telemedicine, nutrition, and even pet insurance
• Salary match 6.8% maximum to 403(b)-retirement plan (co-contributions)
• Transit and parking expenses
• Egg-freezing subsidies or reimbursement for women delaying motherhood
• Subsidy or reimbursement for home office expenses
• Fund staff to develop new skills – almost eight in 10 employers take advantage of this benefit and
• Mental health days (one in five organizations offer this above the regular sick days)

Henry Ford’s $5 day

Urban legend says industrialist Henry Ford cut workers’ hours to the then-unheard-of eight-hour workday. He also doubled their wages overnight. It sounds like that would not bode well for productivity, and it did, though. However, there was much more to the “$5 day”.

First, some context. In 1913, Ford’s staff turnover rate was 370%. Work was plentiful. Ford’s base in Detroit, if employees quit in the morning, they’d easily have another job by noon. In the same year, absentee rates were 10%. That’s according to a research paper by Nathaniel M. Smith from 2021. He found that Ford’s staff in 1913 still earnt $2.34 a day but “could earn $2.66 per day more by abiding Ford’s ‘lifestyle requirements.’ ‘ Yes, there were strings attached to the pay rise and shortened hours.

Smith says the extra pay was linked to the following:

• Ford’s profits (so it was a profit-sharing exercise)
• Reducing turnover
• The need to attend English lessons
• The requirement staff follow ‘lifestyle requirements’ spanning character, living conditions, habits, matrimony, length of service to Ford, and
• An eight-hour shift meant three could fit into a day – greater seamlessness.

Smith argues that Ford’s “$5-day” should be understood as an “entrepreneurial act.” And, yes, it did work – for its time.

The take-home message from Ford’s approach for today is to look at the bigger picture. But there’s one main element – work hours – worth focusing upon.

The lure of shorter work hours

Reduced work hours make sense on a few fronts, including work-life balance. Workers’ ‘health capital’ and social welfare may improve if staff uses the extra time to get more sleep. A Business Management and Strategy journal article suggests we treat sleep as an “affordable and important health investment for all.” The research found that company policies that reduce overtime improved workers’ health, their utility, and the firms’ profits.

Research published in the European Journal of Business and Management Research suggests welfare packages should be on the bargaining table. Such packages are generous fringe benefits, including services and products for employees’ “comfort and improvement” that their wages don’t cover. (Take your pick from the dot points above.)

The study found that organizations offering staff a welfare package boost the latter’s motivation, leading to higher productivity and positively impacting organizational performance.

The researchers urged employers to “let go of the entitlement attitude” and “follow the tenets of equity and fair welfare.” And, importantly, involve your employees in planning their welfare package to ensure it means something to them.

Steering your ship with an ‘us and them’ philosophy isn’t a long-term strategy. You risk creating two classes of employees – those on your existing entitlements and those you’ve lured with extra sweeteners. Are you putting new staff on permanent roles yet leaving loyal casuals on contracts that keep rolling over, for example?

Do your strategy and budget extend to making the work perks uniform for all staff or those at certain levels, such as C-Suite? If there’s a disparity, your team will discuss it in their networks, which won’t help with your other issue – staff retention.

How feasible is your recruitment strategy over the long term? Ensure the package you craft for your next job vacancy is fair, balanced, and focused on employee needs.