If you don't take your allotted vacation, this CEO will dock your pay

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Many companies rely on unlimited vacation as a perk to encourage employees to unplug from the workplace, but SimpliFlying CEO Shashank Nigam is taking his team's vacation policy one step further.

Americans racked up 206 million unused vacation days in 2016, and the CEO of the airline strategy consulting firm noticed his employees' anxiety about time away from the office. To fix this problem, he implemented a mandatory vacation policy in April 2016.

"We had staff who took more vacation than usual and some who didn't take it at all," Nigam tells CNBC Make It. "So having an unlimited vacation policy was almost like having no vacation policy at all. People were feeling guilty, and I didn't see anyone utilizing it to the fullest."

SimpliFlying CEO Shashank Nigam with his team.
Photo courtesy of SimpliFlying

The policy, which initially consisted of employees taking a mandatory one week vacation every seven weeks, was sparked by a TED Talk Nigam heard by New York-based designer Stefan Sagmeister. In the talk, Sagmeister discussed the power of time off and explained how he personally takes one year off every seven years.

While a one year vacation isn't suitable for SimpliFlying's business model, Nigam reworked Sagmeister's arrangement as a more frequent one week vacation, and implemented consequences for any employee who did not comply.

"Given the distraction in our workplace like Slack, emails and messages coming in, to ensure our staff wasn't working during that week off, I put in a clause that said if I see any Slack activity or response to any messages, you will not be paid that week," says Nigam, who also authored the airline marketing book SOAR.

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Threatening employees' pay may sound harsh, but Nigam says that he's received positive feedback from his staff. Since the implementation of the vacation policy, he says his team's productivity has increased by 17 percent.

"One of the biggest problems with previous holiday systems was that you could never really forget about work," says Marco Serusi, who is a senior consultant at SimpliFlying. "With ours you are forced to disconnect. It literally is forced peace of mind."

Since the introduction of the company's mandatory vacation policy, Nigam has made a few adjustments, including changing the frequency from every seven weeks to every eight weeks and making sure that no employee leave interferes with overall business operations.

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"One of the things we realized was we were dropping balls and things were falling off because there was no proper handover, especially when two employees took weeks off back to back," says Nigam. "We are not a very large team. We are just 10 people, so the first thing we did was say no two people can take two weeks off back to back. This ensured there would be one week in which the whole team is here."

In addition to forcing vacation time, Nigam and his SimpliFlying team also hold four company retreats per year to bring their remote team together. In the past, retreats have taken place in Seattle, Washington; Las Vegas, Nevada; and Budapest, Hungary.

While mandatory vacations and company retreats may sound like too much time away from the office, Nigam says it's these exact work-life balance initiatives that help SimpliFlying to attract and keep a talented team.

"Because we are a small company we have to fight hard to attract the top talent," he says. "A strong culture is a good way to market ourselves to potential employees and attract the best."

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