Discover the advantages an unlimited vacation policy can offer your business and employees, and important steps to take when implementing it.
Here's what you need to know:
- “Unlimited” vacation time doesn’t necessarily mean truly unlimited
- Benefits of offering unlimited vacation days include decreased costs for employers in other areas and increased employee productivity
- Other benefits include attracting top talent and alleviating the burden of guilt for taking time off
- Things to keep in mind when creating an unlimited vacation policy include setting conditions and requirements, determining employee eligibility, putting it in writing, and more
Once upon a time, vacation time was doled out judiciously, even stingily depending on the point of view. Today, that’s not the case, particularly when it comes to tech companies and forward-thinking startups.
For these businesses, unlimited vacation time has been the norm and that’s beginning to trickle over into other industries. Why, though? What does unlimited vacation time offer and what are the benefits of adopting it? Should your organization offer this perk? Read on to find out if it’s right for you.
What is unlimited vacation time all about?
Not sure what unlimited vacation time means intrinsically? It’s right there in the name — but it’s a little misleading. First, understand that “unlimited” doesn’t mean that employees can take as much vacation time whenever they want without any repercussions.
Instead, it’s all about balancing the amount of time requested off against an employee’s performance over time. So, an employee who performs well and ranks highly in terms of overall productivity might be allowed to take 4 to 6 weeks of vacation time per year.
An employee who does not perform as well might be limited to 3 weeks, while someone struggling with their performance might take only a week or 2.
So, those worried that an unlimited vacation time policy will mean the office is a ghost town while everyone’s sipping Mai Tais at the beach all year long can relax.
As Aron Ain, CEO of Kronos, points out in his interview with Harvard Business Review, “If you get the right people on the bus, people who have the talent and the work ethic needed to perform, you don’t have to spend time closely supervising them. They’ll get the job done no matter what hours they keep.”
What are the benefits of offering unlimited vacation days?
It brings multiple knock-on benefits to the table
Another reason to consider unlimited vacation days is the number of knock-on benefits that such a policy offers. Organizations will notice these mostly in the areas of employee wellness and family wellness.
By allowing employees to take time off when and as needed to care for themselves and their families, organizations achieve measurable savings in other areas, including:
- The cost of employee health insurance
- The cost of employee disability insurance
- The amount of time lost to sick leave
- An increase in productivity levels
It shows employees they’re seen as individuals
The traditional vacation time plan was designed specifically for long trips that required multiple days. However, many employees do not want or need that many days at a time.
By adopting an unlimited vacation policy, organizations show employees that they’re seen as individuals.
Vacations have changed dramatically over the years, and today, employees may want a few days off for a “staycation,” a day or 2 here or there to attend conferences and special interest events, time off to care for a loved one recovering from surgery, and so much more.
By adopting an unlimited vacation policy, organizations show employees that they’re seen as individuals. The organization doesn’t force them into a one-size-fits-all mold regarding their off-time. Workers can take the time they need when they need it.
It alleviates the burden of fear and guilt
The U.S. is one of the only developed nations to not mandate paid vacation time for employees. The underlying focus on work, productivity, and showing dedication to the company means that many employees regularly fail to take some, most, or even any of the vacation time they’re entitled to enjoy.
Writing for SHRM, Lisa Frye notes, “Many [employees] say they either aren’t sure or don’t think their company wants them to use all the vacation time they earn. Employees who worried that taking a vacation would make them appear less dedicated or replaceable were dramatically less likely to use all their vacation time.”
However, an unlimited vacation time policy sends the message that employees can and should take time off when and where they need it. Still, organizations must take steps to encourage employees to take time when they want or need it.
Writing for Money, Mallika Mitra points out that sometimes unlimited PTO policies backfire. “Because there is no contractually mandated number of days available, some employees end up taking less than the standard two weeks because they feel uncomfortable declaring their work is done and their schedule is free.”
By actively encouraging employees to take time off, organizations expressly permit team members to shrug off that burden.
Unlimited vacation days help build a better team
Organizations must attract top-tier talent if they’re to remain competitive. However, it’s hard to do that without the right benefits package. An unlimited vacation policy positions an organization as forward-thinking but also communicates other important information to prospective applicants:
- It shows that the organization values its employees and wants to provide them with policies that benefit their lives, not just the company’s bottom line.
- It highlights the trust that the employer puts in its employees. With unlimited PTO, employers must trust that their employees will do what’s best for themselves, but also the company.
With this type of positioning, employers can build their brands. They can also improve the quality of applicants they’re attracting, and increase employee retention.
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What to consider when creating an unlimited vacation policy
While offering unlimited vacation time can create a competitive advantage, organizations must take specific steps to ensure their policies are effective. These include the following:
- Set conditions: All “unlimited” vacation policies should have conditions that stipulate who, when, where, and how when it comes to time off. Use limiting terms like “reasonable” and set performance-related conditions, but then make sure all employees are aware of and understand the conditions that apply.
- Focus on output: The key to a successful unlimited vacation policy is the organization’s mindset. Create a focus on output instead of attendance or hours worked. If an employee’s output is where the organization needs it, they should be free to take as much time as necessary.
- Safeguard against not taking time: As mentioned, without a structured vacation schedule, some employees may not take the time they need. HR and management must be proactive in encouraging employees to take vacation and PTO time.
- Put it in writing: Once the policy is outlined, organizations must put it in writing and ensure that this documentation explains everything employees need to know about using their time off, including:
- Determine the requirements to take time off
- Decide when employees become eligible for time off
- Determine scheduling requirements (such as requesting time off X weeks in advance)
- Decide whether other types of leave should be used first
- Track it: Finally, organizations must make sure they have an accurate tracking system in place. Employee time tracking is important for keeping up with things like manager approval of time off. It’s also important for keeping an eye on who is off when. That way, no key duties are left uncovered should more than 1 person take specific dates off.
Unlimited vacation policies set an organization apart
Unlimited vacation policies might fly in the face of tradition, but that does not mean they’re without value. They can help set an organization apart and make it an employer of note. They also help to attract and retain key talent.
Unlimited vacation policies also offer many other benefits. However, it’s important that these policies are implemented correctly and that everyone focuses on accountability. That way, companies can ensure that they work as intended.