Cash Bonus or More Vacation Time: Which Do You Choose—and Why?

When it comes to rewarding workers financially, cash isn’t always king.

Companies frequently give employees monetary bonuses, but a new study suggests that paid vacation time is a perk employers should also consider.

The study’s authors say that while they didn’t explicitly look into whether employees prefer time off, the study found that receiving extra vacation time rather than bonus money makes workers feel less like a mere cog in a wheel and more like people who are recognised and valued as individuals with a life beyond work.

It makes them feel more human, in the researchers’ terms.

And that feeling benefits employers as well as employees, says Sanford DeVoe, a professor at the Anderson School of Management at the University of California, Los Angeles, and one of the study’s authors.

Feeling more human is strongly correlated with higher job satisfaction, greater engagement with work, better relationships with colleagues and less inclination to leave a job, he says.

Feeling seen

In one experiment, the researchers asked about 1,500 participants to recall times when they received a monetary bonus or paid time off—all had received both—and how that made them feel.

Participants responded to the question on a 7-point scale, from feeling more like a robot on the low end of the scale to feeling more human on the high end. Monetary bonuses were given an average score of 5.04, compared with 5.4 for paid vacation time.

“While that difference may sound modest numerically, it represents a meaningful psychological shift,” says DeVoe. “It’s the difference between feeling neutral and feeling genuinely seen as a person.”

The authors then sought to better understand why paid vacation time made employees feel more human. In another experiment, about 500 participants were asked to imagine starting a new job where they might be awarded a bonus. Some were told the bonus would be an extra week of vacation, others were told it would be an extra week of pay.

Participants were then asked about their expectations for being able to keep their work and home lives separate in the new job. Those who could hope for a bonus of extra time off expected more separation between their work and personal lives than those whose potential bonus would be extra pay.

They also reported feeling more human on the 7-point scale. This suggested to the researchers that time off makes people feel more human because it creates a clearer psychological distance from work than a monetary bonus.

No interruptions, please

In a third experiment, the researchers further tested the idea that clear boundaries between work and personal lives were driving their results.

Two hundred participants were told to imagine being on a vacation and receiving two texts, including one from their mother. Half were told the second text was from a friend and half were told the second text was from their boss.

The authors then measured how human participants felt after each scenario. The average score for those receiving a text from a friend was 5.4 on the 7-point scale, compared with 4.16 for those receiving a text from the boss.

The difference in the scores “demonstrates that even minimal work intrusions can undo the psychological benefits of time off,” says DeVoe. “It shows that it’s not just time away that matters—it’s whether work actually lets go.”

All of this is important for employers looking to get the most out of their workers, he says. “For managers concerned with sustainable productivity, giving people uninterrupted time away from work can be a powerful lever.”

Companies typically go public to raise money to supercharge growth. Fast-fashion giant Shein has another motivation.

The company’s initial public offering in Hong Kong this week is allowing it to avoid paying out billions to early investors.

If Shein hadn’t sold shares by the end of the year, the company would have been required to fork out nearly $4.4 billion in cash to holders of its convertible redeemable preferred shares. With the IPO, the $17.3 billion in preferred shares was converted to ordinary equity, and that obligation was wiped off the books.

But Shein was still on the hook for another payment. Holders of those preferred shares were entitled to a payout of billions more, in part because the company’s valuation has fallen from its peak. That payout came to nearly $3.5 billion in cash, according to regulatory filings.

The retailer on Monday priced its shares at 48.56 Hong Kong dollars each, equivalent to about $6.20 and near the middle of the range of HK$47.60 and HK$49.50 it provided last week.

The company pressed ahead with its IPO despite slowing growth and regulatory headwinds in the U.S. and European Union. Shein priced its IPO at a valuation of around $26 billion, roughly a quarter of the $98.2 billion valuation it achieved in a funding round in 2022.

Shein started selling its wares in the U.S. around 2012 and shot to popularity during the pandemic when more people shopped online. Its supply-chain prowess and vast range of styles at affordable prices made the brand a favorite among many U.S. consumers. It showed other retailers, including Amazon.com, that consumers were willing to wait more than a week for their online purchases to be delivered—if the price was right. But rivals soon emerged, such as Temu, which sells more products apart from apparel.

Workers sewing clothes for SHEIN at Dongguan Tingxuyuan Garment Co ltd. — Apparel being produced for Shein by a subcontractor in China. Gilles Sabrie for WSJ

Shein’s business model of selling massive amounts of cheap goods lost some of its shine as more countries started imposing tariffs on small packages. The U.S. removed a trade exemption that allowed packages valued at or below $800 to enter the country duty-free, and the EU has introduced a €3 (about $3.50) customs duty on imports of low-value parcels.

Shein has worked toward its IPO for years, and the looming $4.4 billion obligation wasn’t the only reason it went public. But the threat of the big payout on Dec. 31 was certainly a part of its reason to press ahead, said Jianggan Li, founder and chief executive of Momentum Works, a research advisory firm based in Singapore.

“Complete the listing before then,” said Li, “and a very large liability comes off the balance sheet.”

While that liability will now be off its books with a successful IPO, Shein said it was saddled with another bill: the roughly $3.5 billion it owed its early investors upon going public.

That amount includes $1.3 billion that Shein had to pay several late-stage pre-IPO investors who had been guaranteed a cash payout at an 8% or 12% annual return, and up to $2.2 billion in compensation for the fall in the company’s valuation in the period after they made their investments. The $2.2 billion was a projection based on the lower end of the offer price range, or HK$47.60 per share, so the total bill will likely be smaller than $3.5 billion. The exact amount has yet to be disclosed by the company.

Notably, the amount it owes investors is more than the roughly $1.7 billion the company raised in the IPO. The company said it was paying the funds to its investors out of cash it has on hand.

The investors entitled to the payments include entities linked to HSG, formerly known as Sequoia China, Boyu Capital, Tiger Global, General Atlantic, Thrive Capital and others.

“What the IPO really does here is resolve the capital-structure overhang,” Li said. “It gives investors liquidity, terminates those preferred-share rights and cleans up obligations created when Shein raised money at much higher valuations.”

Shein could have kicked the can down the road by renegotiating terms with its investors, he said: “Shein is not taking the cheapest way out of its old financing obligations. It is taking the cleaner way out.”

Cash Bonus or More Vacation Time: Which Do You Choose—and Why?

New research suggests that bonuses make employees feel more like a mere cog in a wheel.

Feeling seen

No interruptions, please

SHEIN’s Hong Kong IPO wiped a $4.4 billion obligation from its books, but the fast-fashion giant still faces a payout of up to $3.5 billion to early investors.