Should Your Company Offer Unlimited Vacation Time?

Should Your Company Offer Unlimited Vacation Time?

Unlimited Vacation TimeWhen one of our coworkers returned from a ten day vacation in Hawaii, we attached a ball and chain to her desk chair and told her she could never leave us again.

Sure, the ball and chain was a prank, but the sentiment was real. No more vacation for her!

The United States is supposed to be the “no vacation nation.”

So why is it that some companies are offering unlimited paid vacation time?

Vacation time & paid time off are changing:

Watching the news, you might think that the reason employees don’t take time off is that they don’t get paid.

Surprisingly, the Bureau of Labor Statistics says paid leave is the most common employee benefit offered by private sector employers:

  • Many employers have combined sick days and vacation days into a paid leave account, or Paid Time Off (PTO).
  • Over the last 20 years, according to the BLS, fewer workers received straight paid vacation time, and instead have PTO accounts to draw from.
  • Research from the Society for Human Resource Management (SHRM) revealed that by 2015, 53% of companies were offering a PTO plan to their employees.

While an employee may not have paid vacation in and of itself, a PTO plan provides paid time off for whatever the employee chooses to use it for.

Unlimited vacation time:

An interesting new twist is now on the horizon, in the form of unlimited vacation time.

This idea — which is particularly popular in tech startups, and companies such as Netflix and Virgin America — turns the concept of our no vacation nation upside down.

Although unlimited vacation time hasn’t spread far and wide yet, a study by SHRM showed that some companies in the United States now offer it as a benefit.

How does unlimited vacation time work?

With unlimited vacation time, employees may take as much paid time off as they would like, as long as they get their work done.

After all, what’s really important is job duty performance and productivity, not that someone is physically present, right? Sounds great — at least in an ideal world.

Imagine what a great recruiting tool unlimited vacation could be! Surely, that would attract the best and most motivated employees.

What would you need to think about before implementing an unlimited vacation time policy? First, you’ll want to consider whether there are any laws (local, state or federal) that regulate leave.

Paid leave regulations:

As of this moment in time, we don’t have any laws that regulate paid vacation here in Washington. However, there is a trend on the local, state and federal level to regulate paid leave.

While that effort is now mainly focused on paid sick leave, legislation has been introduced in Olympia which would require private sector employers to provide paid vacation for employees working 20 or more hours per week.

Although the bill hasn’t moved forward, it’s a movement that has started on the federal level as well.

“Use it or lose it” paid leave policies:

Some states also regulate how businesses apply “use it or lose it” policies to paid leave benefits.

In these states, earned leave is considered to be the same as earned compensation, and must be paid to employees upon termination.

Washington State does not currently regulate either paid vacation or paid sick leave as earned compensation.

However, businesses should keep their eye on what happens locally, in Olympia and in D.C. to be sure their paid leave policies are in compliance with regulations.

Will employees take advantage of unlimited vacation time?

A fear with unlimited vacation benefits is that employees will take advantage of the policy’s generosity and use far more vacation than is reasonable. However, many businesses have found the opposite to be true:

  • When employees aren’t sure how much vacation time they have available to take, uncertainty can make them less likely to take vacation in fear that they will take more than is acceptable to their boss.
  • Peer pressure plays into the equation as well. When someone’s off on vacation, others pick up the slack. Taking too much time off and overburdening co-workers can impact morale and relationships in the workplace.

A 2014 survey by Harris revealed that the average worker used only 51% of their paid vacation time anyway. With that in mind, would offering unlimited time off just sound like a great perk without impacting the company’s bottom line?

Switching to unlimited vacation time benefits:

Should you choose to make this culture paradigm shift, there are some aspects you’ll want to think about.

  • Consider how it will affect employees who see vacation accrual as a benefit of their longevity with the company.
  • Do you currently allow employees to cash out accrued unused vacation? If so, will the loss of this benefit affect their morale?
  • How will you compensate employees for the vacation days they have already accrued when the policy goes into effect?
  • Will employees be required to get permission in advance? Can their time off be denied and if so, for what reason?
  • What will you do if too many people take time off at the same time?
  • How will you deal with an employee who abuses the policy?
  • Will the policy only apply to exempt employees?
  • What will you do about employees who never take vacation?

The wrap-up:

Whether you give your workers one paid week off, or unlimited paid time off, it’s important for them to step away from their jobs at some time to clear their heads, relax, rejuvenate, and reinvigorate.

Even if we do have our co-worker chained to her desk now, she’s working with a smiling, tan face since her Hawaii vacation.

One other thing is for sure: Everyone here appreciates her all that much more after having to pick up the slack in her absence!