Why You Should Offer Unlimited Vacation

Free catered meals. Cold pressed juice bars. On demand massages. Unless your company has a stockpile of cash, or has a name that starts with an “N” and ends with an “etflix,” you probably cannot afford to offer the perks of a cash rich tech company.

But there is one cutting-edge benefit that you can afford to give your employees: unlimited vacation. That’s right. Unlimited. Imagine a perk that actually boosts productivity, attracts top talent and costs you nothing. That’s right. Nothing.

According to a study commissioned by the U.S. Travel Association, taking vacation has been proven to drive higher productivity, stronger workplace morale, greater employee retention and significant health benefits.

Tech companies like Netflix and Hubspot started the unlimited vacation trend several years ago, but it has since become more mainstream.  Companies like Virgin Group, General Electric (GE) and Grant Thorton now offer discretionary time-off.  And while it may seem like they are adopting this policy out of pure generosity, there is a big benefit to them: it saves money. A lot of money.

By making vacation time purely discretionary, a company no longer has to pay employees for unused vacation days when they leave. The result is considerable savings. According to a study sponsored by Project: Time Off, eliminating the vacation liability saves a company close to $1,900 per employee, on average, and as much as $12,000 per employee on the high end.   Those savings add up to millions for companies with at least 600 people. The same study reported $224 billion in liability sitting on U.S. balance sheets related to unused vacation time in 2014.  Billion. With a “B.” And given that employees seem to be taking less and less vacation, that number is only going up.

Why It Works

Employees who are offered unlimited time off report that it is one of their most valued benefits. According to Glassdoor, vacation time ranked 2nd only to healthcare benefits as the most sought after employee benefit.  And interestingly, companies that transitioned to this policy found that employees took the same or less vacation on average as they did under their old policy.  With the caveat that employees must still get their jobs done, “unlimited” vacation is not really unlimited. It simply means that employees can take time off at their own discretion.

Here is why employees love it:

  • Employees feel that they are treated like grown-ups. Offering unlimited vacation sends a message that you trust your employees to manage their work commitments against the demands of their personal lives.
  • Employees feel that the policy offers them more flexibility. As employees find themselves working more than 40 hours per week, the freedom to take time off without tracking it enables them to find balance without having to ration their vacation time.
  • Employees prefer that you focus on their contribution, not the time they spent at work vs. away from work. No one likes a boss that is clocking their work hours.  By allowing vacation to be discretionary, employees no longer have to log their time off.

How to manage it effectively:

If you plan to transition your vacation policy to a discretionary one, it is important to follow a few guidelines.   While cost savings and added productivity are certainly a bonus, you still want to make sure that this is truly a benefit to your employees.

  • Make sure the policy and process around taking vacation is clear.
    • Employees should still seek approval from their manager before taking time off.
    • Managers should give their employees some parameters around what they feel is reasonable.
    • Employees should understand that they are responsible for managing their time, deadlines and deliverables.
    • Special policies related to paid time-off, like maternity leave, should be handled separately.
  • Plan the policy transition with plenty of lead time, and consider cashing out the unused balance.
    • The liability on your balance sheet not only equates to unused vacation days, some consider it cash in the bank. Those who don’t take enough vacation will feel robbed by the new policy.
    • Consider making the switch at the beginning of a new fiscal year.
  • Trust your employees, and communicate with those who you feel are abusing the policy (a rarity)
    • Trust is a two-way street. Employees should understand that time off is discretionary but commitment to their job is still expected.
    • If you foster a culture of trust and responsibility, you’ll find that abuse of the policy will be negligible.
  • Encourage your staff to take time off.  
    • Lead by example and take vacation.
    • More than just encouraging vacation time, make sure your team is adequately staffed so that employees can take a breather.
  • Brand the policy with a name that fits your culture.
    • Given “unlimited” vacation really isn’t unlimited, you may want to consider other labels.
    • Other options include “Discretionary Time-off” and “Flexible Time-off”

As companies work to attract and retain talent, the ability to offer a competitive perk without reducing profit is a welcome option.  When you add to the mix that the benefit improves the productivity, health and well-being of your employees, it seems like an easy decision. That said, unlimited vacation does not work for everyone.  Companies like Kickstarter found that employees were taking less time off because of ambiguity, and ended the policy as a result.   The key to success is fostering trust, responsibility and commitment, while understanding the value of a break.

By | 2017-02-27T14:02:08+00:00 May 28th, 2016|Business, Life, Work|0 Comments

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