Taking time off is great for employees’ wellbeing, but are the benefits of unlimited vacation policies and PTO endless for employers?
Creating a vacation policy that both your employees and CFO will love isn’t as easy as it sounds. There are pros and cons to each tier of available vacation time, so we’ve outlined some of the most important:
A Case for Unlimited Vacation Policies
Richard Branson, founder of the Virgin Group, implemented an unlimited “policy-that-isn’t” where employees can take as much time off as they want – without prior approval. Also, the amount of vacation time a person takes isn’t tracked.
In a blog post that outlines this forward-thinking approach, Branson writes:
“It is left to the employee alone to decide if and when he or she feels like taking a few hours, a day, a week or a month off, the assumption being that they are only going to do it when they feel a hundred per cent comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business – or, for that matter, their careers!”
In implementing such an open policy, Branson fosters an environment of trust within his company. The key, as he notes, is that each employee is held accountable for her or his work responsibilities.
A Case for Limited PTO Policies
Branson’s approach aligns with Virgin’s overall philosophy, but what happens when unlimited vacation policies don’t work out as intended?
According to a report by CNN Money, fundraising platform Kickstarter got rid of its flexible PTO policy in favor of a more clearly defined policy. According to a Kickstarter spokesperson, the flexible policy actually caused more confusion for employees.
This lack of clarity surprisingly discouraged employees from taking as much time off as they had previously with the more structured approach. With the goal of creating a great work-life balance, Kickstarter ditched the unlimited policy for one that offers employees up to 25 vacation days a year.
A Case for Testing
In an op-ed for Fast Company titled “We Offered Unlimited Vacation For One Year. Here’s What We Learned.”, Mammoth HR CEO Nathan Christensen provides some keen insights. Despite the new vacation policy’s popularity among employees, there wasn’t a significant shift in the actual amount of vacation time being taken.
“Over the course of the year, employees took roughly the same number of vacation days under our unlimited policy as they did the year before, when we accrued paid time off (PTO) in a more traditional system,” writes Christensen.
Although there was a minimal difference in the total amount of vacation time used, Christensen decided to keep the unlimited policy. Simply offering the more flexible policy contributes to a company culture of trust.
Tips for Implementing an Unlimited PTO Policy
Sometimes unlimited vacation policies are the right solution, but sometimes they aren’t. So, what’s the best solution for your company?
If a limited approach is, well, limiting your company, it may be time to try out a more lenient approach. When implementing an unlimited policy, try out these tips:
- Encourage employees to take advantage of the perk without abusing it – when an employee takes time off, how are his or her coworkers affected? If that employee has a set amount of work to complete, do his or her colleagues need to complete that work in the interim?
- For a request of more than a few days off, ask employees to provide a work completion plan. The longer an employee is away from the office, the more likely that absence is to affect the business. Asking employees to provide a work plan for requests over a set number of days works in two ways:
- Holds employees accountable and aware of deadlines
- Protects the business from unexpected dips in productivity
- Create a culture where employees enjoy coming to work. CFrom offering flexible work schedules to providing lunch once a week, there are countless ways a company can foster an environment of year-round employee appreciation.
- Set benchmarks or standards for the expected use of the policy (e.g., no more than 4 weeks)
- Watch the trends and track your PTO data. Some employees will take more time off than others, so it’s important to stay on top of employees who take the freedom a little too far. Communicating early and consistently is key to showing employees that you want them to succeed in their roles.
- Consider calling the unlimited PTO a “test period.” Many companies have been open about testing unlimited PTO, which is a great way of showing your employees you want to cater to their needs, but you’re also focused on the business’ bottom line.
When it comes to creating the perfect vacation policy, there isn’t one route. Each company is different, so make sure your policy reflects your people and the culture you strive to create.
This blog post was originally published on March 13, 2017.