How Does New Paid Vacation Initiative Affect Companies in Mexico?

One of the trendiest topics regarding human resources in recent months is the initiative to double the annual minimum paid vacation days for laborers in Mexico. If everything goes according to plan, Mexican workers will begin 2023 with a new 12-day vacation scheme. But, will this benefit companies in the long run?

I want to start by talking about my own experience. In my first full-time job, I had a 10-day vacation benefit, which seemed to impress everyone; however, it soon felt insufficient. I wanted to visit home for the holidays, but also travel with my friends and maybe go on a longer trip in the summer. There wasn’t much to do about it, so I stayed and planned thoroughly how and when to use my vacation days. But most of my friends working at other companies only had six days a year, which made them quit more than once in order to take a long vacation. I would never go to that extreme, but still, vacation policy is one of the key factors I take into account when switching jobs.

So, if paid vacation days are a key benefit for employees, why are companies so reluctant to increase them? The main reason is cost: doubling the annual minimum paid vacation days will increase the cost of payroll 9 percent, approximately. Also, vacations are often linked to a drop in productivity — when someone is on vacation they’re not working, right? In summary, some companies think that more vacations increase their expenses and lower their productivity. I disagree.

Payroll will increase, that is a fact. But, how much does employee dissatisfaction cost? 

When discussing job satisfaction, we must understand the four different ways that employees respond to dissatisfaction: Exit, Voice, Loyalty and Neglect (EVLN model behavior).

Exit is when an employee thinks about leaving the organization. Many studies have concluded that the cost of employee turnover is around three  to six months of their salary. This is one of the most damaging responses to job dissatisfaction.

Voice refers to the employees expressing their feelings either in a constructive way or by filing formal grievances that can affect the overall employee experience for the organization. It can increase the discomfort throughout the organization, creating a bigger problem.

Loyal employees tend to wait in silence for days, months or even years, which leads to stress, fatigue and burnout. This can affect the employees’ performance and compromise their health.

Neglect can translate to lacking in diligence; employees who neglect their functions often reduce their effort and attention and increase their absenteeism and lateness. Ultimately, it becomes what is known as “quiet quitting,” meaning that the employees put no more effort into their jobs than absolutely necessary. This creates a decline in productivity, affecting the financial performance of the company.

Regarding vacation policy in companies and the EVLN behavior model, here are a few examples of how a poor vacation policy can affect both companies and employees:

For starters, employees will take into account paid vacation days in job offers, which can increase the turnover in the company. In addition to the cost directly associated with this, high turnover means that employees never stay long enough to contribute anything of value to the company. This is a clear example of the exit behavior. 

On the other hand, employees who use voice can have a critically dangerous outcome for companies. Because  they feel disappointment with the company’s paid vacation policy, they could become very vocal about it, spreading the feeling among other employees.

On the contrary, loyal employees suffer in silence the lack of vacation days, which creates a ticking bomb of stress, dissatisfaction and frustration among  the company’s most trustworthy and valuable employees.

In my opinion, neglect is the most common behavior among dissatisfied employees. They tend to think they live only to work and feel trapped in their job so they slowly start reducing their effort, attention and commitment to the company.

To summarize, vacation policy can be a reason behind many different negative behaviors among employees, which ultimately can affect the company’s financial results and overall performance.

Also, it is important to point out that employees can use more than one behavior at the same time depending on their personality and situation. 

Consequently, I think that the new initiative to double the minimum paid vacation days in Mexico will ultimately help companies improve their employee experience. Additionally, I would like to point out that even with the 12 days proposed, Mexico will still be at the bottom of the OECD’s 38 member state’s list, where other countries have more than 20 days of minimum paid vacation days per year.

In conclusion, vacations are crucial for employees' well-being and mental health and this will ultimately translate into a happier and more productive person who is valuable for the company. We, as society, must understand this in order to change the narrative.