The rising popularity of unlimited vacation policies present potential rewards — and surprising challenges
The majority of employees aren't only looking for the highest paycheck—they want the best, most comprehensive benefits package. And whoever offers the perks that match the lifestyles that potential employees want to achieve is going to be a recruiting powerhouse. And this includes unlimited time off.
Yes, you read that right. You can take a minute to collect yourself if you need to. But take comfort: this is a notion far less radical than it sounds.
Over the past several years, thousands of companies have been experimenting with offering their employees paid vacation with no formal limit, and the results have been far from what anyone has expected. There have been benefits to both employees and companies alike. Of course, there have been challenges, and there have been challenges, but more often than not, it has worked out very well for everyone involved.
If you're thinking about weighing the pros and cons of introducing an unlimited paid time off (PTO) policy, consider this your primer on the subject.
Unlimited Vacation: The Good News
As we already established, offering the most attractive benefits for your employees is a great way to recruit the best talent in your field — but the potential benefits of offering unlimited vacation go far deeper than that.
For starters, it can improve not only employee happiness but also their well-being. When someone doesn't have to worry about how many days off they've used before requesting time for an important family or personal event, for example, they're likely to experience higher job satisfaction. This can go a long way toward reducing turnover (remember: it's usually more cost effective to keep an existing employee than it is to hire a new one). And the ability to take a day off to rest when an employee is sick or needs to see a doctor can reduce the spread of communicable diseases, as well as employee burnout — you'd be shocked how many employees regularly attend work when they should be at home because they're afraid of losing wages.
There is also the possibility of reducing your own costs, since you eliminate "accrued days off" that need to be paid out when an employee leaves the company. In a traditional PTO structure, employees may feel pressured to use every day off that they have in order to get their money's worth — especially if there's no rollover from year to year. But in an unlimited PTO situation where there's more flexibility, they're likely to only use the days they want or need since there is no standard amount, and may in fact take fewer days off (more on that in a moment).
Unlimited Time Off: The Bad News
It's not all good news when it comes to unlimited vacation. For starters, you can unintentionally create discord between more tenured employees and newer hires. In the past, it has been a fairly standard practice to offer increased vacation time as a bonus with promotions for the long-serving and faithful; introducing unlimited PTO can undermine that incentive. It may cause more experienced employees to resent the new crop who they see as having reaped a benefit they've not yet earned. (Granted, it's often startups that are managing PTO without limit, so there are few seasoned employees.)
For a system like this to work, there needs to be trust. While the majority of companies with unlimited vacation have seen remarkably little abuse of the policy, it can still happen, and you need to be able to trust your employees to treat it fairly. You also need to encourage communication and planning ahead. For example, you can't have two key employees with overlapping time off, if one of them is the only person who can handle the work the other would leave behind.
Unexpected Results from Unlimited Vacation Policies
Unlimited time off can change the structure of how people take their vacations. Instead of taking off a week or two (or three) at a time, many employees would take extended weekends, the occasional day off for family time, or even just the occasional afternoon off. With less extended time off, you have fewer projects being put on hold, less confusion over who should cover which duties during and absence, and the potential for improving employee satisfaction.
On the other hand, however, many companies that have already implemented unlimited vacation have experienced a strange and potentially damaging side-effect: employees taking less vacation overall. This can emerge from a number of root causes, from employees not wanting to seem lazy or like they are taking advantage of a system, to camaraderie, to competitive "I'm a better employee than you because I take fewer days off" mentalities. You may actually find yourself having to encourage employees to take time off so that they can recharge and relax — who'd have thought?
The Verdict
So, is unlimited vacation too good to be true? Not at all — but don't rush into drafting up a new policy. If you believe it's a good fit, take the time to consider the best approach for your company, create policies that ensure best practices are followed, and be ready to adapt to the change of dynamics.
