When Goldman Sachs — the investment bank known for its hard-charging culture — recently told its senior bankers that they could take off as much time as they wanted, the policy shift immediately catapulted it into the ranks of America’s most employee-friendly companies.
Managers should “take the vacation they need so they can continue to run hard, be competitive, run productively, but take care of their families,” David M. Solomon, Goldman’s chief executive, told CNBC.
But the bank’s move hasn’t led to much cheering at a place where employees build their careers on being available to clients any time, anywhere. Goldman, in particular, has long prided itself on that ethos — so much so that its leaders rarely use all their holidays and often forgo out-of-office messages. Some have even been known to take satellite phones on vacation.
“It sounds psychologically soothing, and it’s part of Goldman’s cultivating a gentler and softer Goldman image,” said Mike Mayo, a banking analyst at Wells Fargo. “The reality is it’s not going to make any difference. It’s like telling a restaurant owner you can have unlimited vacation — will that change how the restaurant owner works?”
Some observers have been downright cynical about Goldman’s motives, calling the policy a cost-saving move. In the past, if employees had a fixed number of vacation days that they didn’t use, the bank had to pay them for those unused days when they quit. But unlimited vacation means the bank doesn’t have to pay them anything.
“This was completely driven by financials,” said Veehtahl Eilat-Raichel, the chief executive and co-founder of Sorbet, a firm that buys unused vacation days from employees at other companies and puts the cash value on prepaid cards. Unlimited paid time off is “positioned as if it’s an amazing benefit for employees, where in fact it actually is really bad for employees and amazing for employers,” Ms. Eilat-Raichel added.
Goldman Sachs — which recorded a record profit of $21.6 billion last year — said any cost savings were incidental.
“Our focus is on incentivizing our people to take more time off, rest and recharge,” said Bentley de Beyer, the bank’s global head of human capital management. “We are proud to join with many other companies in introducing a flexible policy that requires a minimum amount of time out of the office to continue to build resiliency and sustained performance.”
Unused vacation days have long posed a financial challenge to employers. When employees quit — especially senior executives, with high salaries and mountains of untouched vacation days — the company often has to pay them for their unused time off. It has become an even bigger financial strain for companies in recent months, given the tremendous churn in the labor market.
The Return of Return-to-Office Plans
Though Covid cases are on the rise again, companies are still attempting a return to some form of in-person work, amid hybrid-work models and office revamps.
The average employee in the United States holds some $3,000 in paid time off at any given moment, according to data from Sorbet. Employers across the country owe roughly $272 billion in unused vacation days, Sorbet found.
Although companies like Netflix and LinkedIn have long offered unlimited vacation to employees, the option has become popular lately. In a hot job market, unlimited paid time off can serve as a recruiting tool and tell a potential hire that the company values employee wellness. But in practice, unlimited vacation often turns out to be more advantageous to the employer than the employee, because it is generally accompanied by a policy of wiping out unused days from its accounts.
Research has shown that employees with unlimited vacation often take less time off because they don’t want to overstep or be perceived as unmotivated. One 2017 study by the human resources platform Namely found that workers with unlimited vacation days took two fewer per year on average than those with a fixed number of days off. And employers that tell workers to take off as many days as they want typically don’t have to pay them for the vacation days they don’t use.
In other words, unlimited vacation can allow employers to position themselves as caring and thoughtful, while reducing their own financial investment in it.
At Goldman, the new policy has chafed bankers partly because Mr. Solomon has been adamant about a return to the office.
Mr. Mayo, the banking analyst, said he was shocked to see how many people were working in the office when he went to Goldman’s headquarters for his first in-person meeting during the pandemic. Mr. Solomon regularly worked from the office, and urged managers to show up in person — a tactic that led some senior bankers to leave the firm.
Managing directors and partners at Goldman are typically allotted 20 vacation days or more, depending on the length of their tenure, said a company representative who requested anonymity to discuss personnel matters.
Under the new policy, more than 1,400 senior bankers will no longer have a cap on their time off, although all employees will be expected to take a minimum of 15 days a year beginning in 2023, according to a memo viewed by The New York Times. The 15-day stipulation is to provide some structure to junior employees, who will also get two extra days off. To make sure the changes stick, the firm will keep tabs on vacation days taken and address the matter if needed during performance discussions, the representative said.
Senior bankers who take fewer than 15 days will not be paid for the remainder, the person said. In 2017, Goldman had already scrapped a policy that allowed employees to amass unused vacation, but some longtime staff still have days banked from earlier years.
“It’s a great thing — they’re trusting their senior people to do what’s right because they’ve earned their stripes, they’ve put in their time and been successful,” said Paul Sorbera, president of Alliance Consulting, a Wall Street executive search firm.
Still, there are risks. Employees who report to “old school” managers might jeopardize their careers if they take too much time off, Mr. Sorbera said. And in an industry where it’s common to work through parental leave and scrap vacation plans, change can be slow.
“You can’t just set up a new policy and then the next day, the managers come out and crack the same whip as before,” he said.
William R. Gruver, a former Goldman partner who spent two decades at the firm, was skeptical about the open-ended vacation policy. “I don’t think they’ll really leave the job behind — they’ll be working from the mountains or the beach,” said Mr. Gruver, who served as the chief operating officer of Goldman’s equities division until 1992.
Mr. Gruver compared his love for work to an addiction, but after it contributed to a marriage breakdown and health problems, he left at the age of 48 and went on to teach at Bucknell University. He now works at a think tank.
In recent years, Goldman has rolled out family leave benefits. It gave 10 days off for Covid-19 disruptions, which about 4,000 employees used. In 2019, it extended parental leave to 20 weeks from 16 weeks.
Goldman’s vacation benefits echo those offered by other financial firms, including BlackRock, a giant asset manager, and Bridgewater, the world’s largest hedge fund.
Long before Wall Street, the technology sector embraced flexible time off — and was aware of its potential downsides. In his 2020 book, “No Rules Rules,” Reed Hastings, a co-chief executive of Netflix, discussed the company’s unlimited vacation policy, instituted in 2003, and noted that the benefit worked best if leaders served as an example by taking time off.
But Robert Sweeney, a tech executive, said that when he worked at Netflix in 2011 and 2012 he felt ashamed asking his manager for time off. Mr. Sweeney recalled a period that year when he had been working 80-hour weeks to introduce a new product. When he completed the project and asked for a vacation, he said, his supervisor chided him for leaving when yet another major deadline was looming.
In 2012, when Mr. Sweeney started his own company, Facet, which does tech recruiting, he mimicked Netflix’s unlimited-paid-time-off policy. But he found that his employees were taking very few days off, and many were feeling burned out. Eight years later, Mr. Sweeney changed Facet’s policy to offer a minimum of 25 vacation days a year, with managers given the discretion to grant more to high performers.
The experience has made him wary of employers offering unlimited vacation. “They claim they’re pro employee health and pro time off but they’re actually making zero commitment to it,” Mr. Sweeney said.
Kate Kelly contributed reporting.