The first thing you need to do is not exhibit your stress. It is normal for any project manager to be stressed, but it is not healthy to show that he's stressed, for that stress will be passed on to everyone working with that project manager, especially team members.
Once you're able to control YOUR feelings, you can then move on to work on the your team members' stress.
The first thing you need to remember is that giving more money and vacation days will not address the stress problem, but will create another problem, you will make your team's expectations higher, and they won't do good work unless they are promised something in return (at this point they will tend to forget that they are getting paid for working, trust me). Your team's motivation will be solely based on the "what's in it for me" concept, and they will start having a sense of (wrong) entitlement.
Here are some tips to relieve your team from stress:
- Make sure they can see that the project is progressing. No matter how fun the project is, team members will start hating it and becoming really stressed if they don't see the end. Show them that there is an end, and that they are getting there, and they will be less stressed.
- Don't make a team member work on the same task for a long time: If a task is very long, then split it and assign it to different team members.
- Protect them from management and from the client: Never let management or the client communicate directly with your team members, not only this is stepping into your territory, it will later confuse them and stress them.
- Don't make them work for long hours: Avoid overtime (in all of its forms), and never make them work on their lunch break.
- Allow as little change requests to go into the project: An important skill that project managers need to possess is learning how to say no to the client and the stakeholders. Don't allow every change request to go through, discuss it, make sure that whoever is "requesting" it understands its impact on the project. The main cause of stress and frustration of many team members is when they work on an endless task because of the unlimited change requests. I have seen tasks being done on way, and then changed, and then changed back to the original way they were done, MULTIPLE TIMES!
- Help them when you feel they are in need: Always communicate with your team members and ask them if they need help, some team members (because of their ego) will refuse to ask for help, but it is easy for you to know if they really need help or not (if the task is taking more time than initially planned).
- Have padding in your schedule: When you plan the project, don't give 4 hours for a task that you know should take no more than 4 hours, give it 6 hours, but beware, Pareto's principle is the evil brother to the schedule buffer (the more time you will give to a task, the more time it will actually take). Just be careful in your padding, don't overdo it.
- Immediately resolve conflicts: Make sure you never have a sour environment in your office. The moment you feel that there is a conflict between two or more of your team members, work immediately on resolving it. Also never have personal conflicts with your own team, no matter how tempting it may sound like.
- Have milestone parties: Have a little party in the company whenever you finish a major deliverable. People will feel that they accomplished something, they will forget all about the stress that they have gone through to finish this deliverable, and they will be excited to work on the next deliverable.