Unlimited Vacation Time—Effective Policy or Too Good to Be True?

Perhaps you’ve heard about the growing number of organizations that are opting to remove limits from employee vacation time. Instead of imposing an arbitrary number of vacation days for employees, such as 2 weeks, they’re allowing employees to take time off as needed, without counting the days.

To the prospective employee, this may sound like pure bliss. To the employer, it can have benefits—not the least of which is reduced administration hassles—but it can also have drawbacks. Let’s take a look at some of the pros and cons of implementing an unlimited vacation policy.

Pros of Implementing an Unlimited Vacation Policy

Keep in mind that we’re looking at this from the employer’s perspective! Here are some of the pros of an unlimited vacation policy:

• It can be a great recruiting tool.
• It could result in a higher-quality applicant pool. With more applicants to choose from, employers may have a better selection of talent.
• Such a policy can increase employee satisfaction. Showing this level of trust tends to make employees feel more satisfied with their job.
• Less risk of employee burnout. When employees are able to take time away as needed, they will be more productive while in the office. This can also result in employees being less likely to save up their time for a longer break—they instead take shorter breaks more frequently since they will not run the risk of using all of their vacation time.

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• More incentive to get work done in the most efficient way. If an employee knows that he or she can take more time off if they work more efficiently, this creates an incentive to do so! This means productivity can increase even with supporting employees being away more often.
• This flexibility can extend even to taking partial days off, which allows employees to feel more in control of their work-life balance.
• No more “use it or lose it” mentality. With systems that require employees to take their vacation by a pre-set date, that creates a situation in which many employees are gone at the same time (often in December) when they realize that their time to take vacation has nearly run out.
• In practical terms, the companies that have implemented these policies are finding that employees don’t tend to abuse the system. (In fact, the opposite may be true, which we will discuss in a moment.)
• Reduced administration costs. If the employer chooses, this type of policy can mean no more meticulous tracking of accrued vacation days and days taken away from the office.
• Less perception of unfairness between employee groups who get differing vacation amounts.
• Since federal law has not yet intervened on this topic, it could mean that employers with an unlimited vacation policy are under no obligation to pay out accrued vacation days when an employee leaves, as there are no accrued days. (Check your local laws!)

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Cons of Implementing an Unlimited Vacation Policy

Most of the cons center on the difficulty to implement such a program without creating unintended consequences. Such a program requires a lot of thought and careful implementation. Unlimited vacation does not mean there is no oversight, and it doesn’t mean there are no rules!

That said, here are some of the cons and potential pitfalls to be aware of:

• Employers may have to be much harsher on enforcing employee project deadlines or goals so that employees don’t take time off while letting projects slip.
• Despite the option to take unlimited time, this type of arrangement actually often results in employees taking less time off and/or working while they’re meant to be on vacation. This can reduce some of the aforementioned benefits. (U.S. employees typically do not take all of their vacation time, even when it is quite limited, and some employers combat this by implementing mandatory minimum vacation days to take each year.)
• The business may have to be more selective in the hiring process to ensure that new employees truly are a good fit and can work within this culture.
• It has the potential to breed resentment if workloads are not balanced. For example, if one employee can get all of his or her work done and take much more time off than someone else who works equally hard, this could be problematic. Employers would be tasked with ensuring that the system is implemented in a way that doesn’t favor specific individuals inappropriately.
• This type of program is not practical for some types of companies or for some departments. It will work only if there is sufficient coverage to get the work done when an individual is away for a couple of weeks, which may not be practical in all cases.

In tomorrow’s Advisor, we present a few more cons of unlimited vacation (including potential legal entanglements) along with ways to manage them, plus an introduction to the timely webinar, Recruiting and Technology: What’s Happening in the Real World?