Unlimited Vacation: Realities, Rewards, and Risks

A job that comes with unlimited vacation sounds like a dream come true. What’s better than lying on the beach every day with a cocktail in hand, plus getting a paycheck, too!  In reality, unlimited vacation policies are a bit more complicated with potential advantages and drawbacks for both employees and employers.

What is an unlimited vacation?

To begin with, an unlimited vacation is far from “unlimited”. “Flexible” would be a more accurate way to describe it. This type of vacation policy lets employees decide how many days to take off, when to take them, and how these days will be used. It can be a sick day, a vacation, or just time spent catching up on errands.

Who is offering them?

While unlimited vacations are a hot topic, only one percent of companies have actually taken the plunge according to the Society for Human Resource Management (SHRM). Those that are adopting unlimited vacations tend to be tech startups that are talent-hungry, eager to attract Millennials, and more open to less traditional operational approaches. LinkedIn, Netflix, Hubspot, Evernote, and Zendesk are just a few of the companies that have introduced unlimited vacations in recent years. However, more traditional blue-chip companies are also starting to pay attention to the trend, with GE making this perk available to their executives as of 2015.

Proven business benefits

While unlimited vacations offer employees more freedom and control, there are also upsides for employers.

1. Higher productivity. Interestingly, loosening up the rules around vacation can tighten up productivity. Putting employees in charge of their paid time off can enhance employee trust and respect, which according to an SHRM study, fuels higher productivity. In addition, companies that focus on results achieved, rather than hours logged can replace a culture of “presenteeism” with a more engaged, focused, and empowered approach to work.
2. Lower business costs. With traditional vacation policies, employees are compensated for banked vacation days they don’t take. With unlimited vacation, employers are no longer required to pay this cost—a key reason for implementing the policy, according to the SHRM article. Research from Project: Time Off reveals just how significant those savings can be. A review of the financials for 144 public companies showed an average savings of $1,898 per employee.
3. More access to talent. A 2012 Ask.com survey showed that offering unlimited vacations could give companies a significant edge in the talent wars. More than two out of three potential recruits (69 percent) said they would be swayed to take a new job if the company offered this perk.

Potential downsides

While unlimited vacations offer clear business benefits, it’s not all sunshine and piña coladas. Interestingly, while companies tend to worry most about employees abusing the privilege, the reality is that poor planning and poor communication are often the bigger issues.

For Tronc (formerly Tribune Publishing), implementing an unlimited vacation policy was a disaster. Employees who stood to lose their accumulated vacation time, as a result of the transition, threatened to sue the company, and the firm was forced to reverse the decision within days.

Unlimited vacation policies can also be confusing. Kickstarter ended its unlimited vacation policy because employees didn’t know how much time they were actually allowed to take off, and the lack of clarity was making them feel stressed and uncertain.

Who should try it?

Unlimited vacation policies may not be the right fit for every company, but they are worth a closer look if:

• You have a younger workforce that prioritizes freedom and autonomy.
• You have a healthy company culture and high levels of trust.
• Your employees have clearly defined projects or targets to deliver.
• You offer skills assessment tests to determine knowledge gaps and reward employees who increase their skills over time.
• Everyone is eligible for the initiative (no hourly/exempt employees).

Best practices

If you’re planning to implement an unlimited vacation policy in your organization, these two best practices can help the process go smoothly.

1. Communicate clearly. Change can be disruptive–even if it’s a positive change. Let your employees know well in advance that the rules around vacation are changing. Outline what the new process will look like, and what will happen to existing benefits, including accrued vacation.
2. Establish guidelines. While limitless freedom may sound great, most employees crave structure. Consider creating a guideline such as HubSpot’s “two weeks to infinity,” which tells employees that while there’s no upper limit, everyone is expected to take a minimum of two weeks off.

Does your company plan to adopt an unlimited vacation policy? If so, what’s motivating the decision? Share your experience in the comments.