The Risks & Benefits When You Offer Employees “Unlimited” Vacation Time

© Barry Barnes - Fotolia.com
© Barry Barnes - Fotolia.com

The concept of unlimited vacation – an arrangement where employees can take vacation, personal and sick time whenever, however and in whatever quantity they want – is getting a lot of air time these days and gaining cache as a benefit for “enlightened” workplaces.

Like all “new” reward ideas, unlimited vacation has its pros and cons. BLR’s Daily Advisor recently did a nice series highlighting the benefits as well as the risks of this benefit, showcasing the advice of attorney Christina Gomez of Holland & Hart LLP.

The Benefits

Many of the benefits are obvious ones, and they are particularly attractive in today’s economic and work climate.

An unlimited vacation policy can be a boost to morale and a means to demonstrate the trust the organization has in its employees. It can provide an additional perk at little to no cost, and it can help foster workplace flexibility. Such a policy can also help create and reinforce a culture of mutual respect and responsibility.

And in a number of states, it can help the employer avoid the obligation to track vacation time on its balance sheet and pay out accrued and unused vacation at employee termination.

The Risks

Beyond the more apparent risks like the impact of staffing uncertainty on work planning/coverage and the potential for employee abuse, Gomez points out that an unlimited vacation policy also has the potential to be an obstacle (ironically enough) to employees taking the time off they need to refresh and recharge.

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Without a designated bucket of vacation time that they’ve formally earned, employees may not feel they can really take the time off. Or, they may perceive that “unlimited vacation” is really code for “no vacation,” and that a benefit is – in fact – being taken away from them.

The Bottom Line

Like any reward policy change, unlimited vacation should not be implemented as a knee-jerk quick cultural fix or because the cool tech company down the road/in the news has put such a program in place.

Like any reward policy change, it will be important to honestly assess the risks and benefits relative to your organization’s particular culture and workplace environment – not only to ensure that the program is likely to deliver on its promise but also to ascertain the steps necessary to present it as a win in your employees’ eyes.

This was originally published on Ann Bares’ Compensation Force blog.

Ann Bares is the Managing Partner of Altura Consulting Group. She has over 20 years of experience consulting in compensation and performance management and has worked with a variety of organizations in auditing, designing and implementing executive compensation plans, base salary structures, variable and incentive compensation programs, sales compensation programs, and performance management systems.

Her clients have included public and privately held businesses, both for-profit and not-for-profit organizations, early stage entrepreneurial organizations and larger established companies. Ann also teaches at the University of Minnesota and Concordia University.

Contact her at abares@alturaconsultinggroup.com.

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1 Comment on “The Risks & Benefits When You Offer Employees “Unlimited” Vacation Time

  1. While I personally think an “unlimited” policy is a good thing, I do think there’s one additional con argument I’ll throw out there. And that is as follows: in every organization, there are policies. They may be written or unwritten, but there’s still there. Saying you have “no dress code” doesn’t really mean that anything goes if you show up to the party/wedding and everyone’s staring at you. Saying you have “no social media policy” or that “common sense rules” or “don’t do evil” all sound good, but they’re still subjective; one manager in the company may think one Facebook post is funny, and the other may think it’s highly offensive. A baseball team’s written policy may be “our franchise values sportsmanship and respect” but its unwritten policy may be “if your pitcher throws at one of our hitters’ heads, one of our pitchers will throw at one of your hitters’ heads, but harder.” 

    The unwritten policy becomes more important than what’s in writing, or what’s not in writing.In the end, everyone’s got a policy — it just may not be on paper. So an “unlimited vacation” policy really isn’t one. It may mean that if you devise a brilliant invention for your tech company, worth millions, you could take five months’ off, as you’ve more than earned your keep. Or — maybe not, maybe five months is always too much. Employees are often left wondering and asking each other and nervous about whether they’re doing the right thing. Different managers may have a different unwritten policy in their heads, and what may work for one person may not work for another, even if they’ve heard through the grapevine that, say, four weeks’ off is OK.Again – I’m all in favor. I just think one of the imperfections is the one of confusion/uncertainty.

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