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October 06, 2020

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The unlimited vacation policy story Netfix gives may be have as much relationship to the truth as the pez story does to the founding of eBay. Much more likely is Hastings found a way to reduce his payroll costs up to 5%, no small chunk of change!

You may not be aware that in CA vacation is by law is an accrued benefit. The law doesn't say how much you must get, but it says that once earned you are entitled to be paid for it if you ever leave the company. So CA companies put a charge on the books for vacation as it is earned. If they give 3 weeks a year, not an uncommon amount, that's 5-6% of salary.

Now take a company like Netflix. People are fired all the time, and those keeping their jobs may never take even 3 weeks a year. The day they walk out the door Netflix owes them nothing for the vacation they never took, nor did it have a charge against earnings while they were employed.

So perhaps Netflix was motivated by trust in employees and an enlightened attitude when they devised their policy. Or maybe they just found a clever way to sidestep CA law and cut costs.

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