Unlimited vacation policy pros and cons

There is a new (granted, it’s small) trend that’s moving through some cutting-edge companies: unlimited vacation policies.

There are numerous companies that are trying out an open vacation policy. For some, it’s working well, but not so much for others. We’re going to take some time to explore the best parts of having an unlimited vacation policy and the dark side. We’ll even give you some tips on how to best implement an open vacation policy if you’re ready to jump on board and provide this awesome benefit to your staff.

Companies with unlimited vacation

Like we said, this is a small trend, with only about 1 or 2 percent of employers offering an open vacation policy for their employees. The companies with an unlimited vacation policy are most often tech companies and agencies that have heavy competition for a narrow talent pool, and they use this benefit to recruit the best talent.

Some of the companies who currently offer employees unlimited vacation are:

  • ZenPayroll
  • Netflix
  • VMWare
  • Workday
  • Riot Games
  • LinkedIn
  • Virgin
  • Hubspot
  • GrubHub
  • Evernote
  • General Electric
  • Grant Thornton

Many of the companies with unlimited vacation don’t even track how many days off their employees take.

American work culture

Many companies are concerned and don’t implement an unlimited vacation policy because employees may abuse the privilege. However, American work culture likely won’t allow that. A 2014 Glassdoor survey found that the average American employee uses only half of his or her vacation days. Moreover, 61 percent work during their vacations.

Analysis from Project: Time Off has found that from 1976 to 2000, American workers used an average of 20.3 days off per year. In 2013, that number dropped to just 16 days per year. That’s almost an entire workweek less of time off than 13 years before.

Not convinced Americans work too much? There’s more. American employees tend to miss three notable events a year because of work. Project: Time Off found that 1 in 10 Americans misses a funeral because of work. A change to an unlimited vacation policy might be good for American work culture.

Additionally, studies have shown that with companies that have implemented unlimited vacation policies, employees aren’t taking off much more time than they were before. Most employees take equal or less time off with an unlimited vacation policy.

What has changed is that employees take time off in spurts of days, not weeks. People take four-day weekends or a few days here and there. The U.S. is the only developed country that doesn’t legally mandate paid vacation or holidays for employees. The average American employee receives 13 vacation days and 8 paid holidays. For most European employees, they receive 20 vacation days and 13 paid holidays.

Mini case study of companies with unlimited vacation

When Mammoth decided to implement an unlimited vacation policy, they agreed to try it for a year and then evaluate.

We won’t keep you waiting: The employees considered it one of their most valued benefits. In a survey Mammoth conducted, the unlimited vacation policy was ranked third, after health insurance and 401(k). The unlimited vacation policy was more important to employees at Mammoth than vision or dental insurance.

Mammoth wasn’t that surprised that the open vacation policy was popular with employees, but they were surprised that employees took roughly the same amount of vacation days as they did under the traditional system.

Mammoth found that the majority of their employees averaged three weeks of paid time off, plus 10 paid holidays under the unlimited vacation policy.

The silent message in an open vacation policy

An open vacation policy says much more to employees than just “you can take off as many days as you’d like!” There are a few hidden messages in an unlimited vacation policy.

An open vacation policy allows a company to acknowledge their employees as human. It tells employees the company understands that they have needs and interests beyond work, and sometimes those can’t be scheduled in advance.

Another silent message the unlimited vacation policy conveys is that the company trusts its employees. The company is instilling trust in each employee that he or she will complete the work regardless of the amount of time the employee takes off.

The third silent message that employees receive with an open vacation policy is that they can be an individual. Each person needs a different amount of time off. We all have different work styles and different personal lives. These patterns might also shift from year to year, depending on what’s going on in our personal lives. An open vacation policy allows for these shifts to happen naturally.

Tips to implement an unlimited vacation policy

Putting an unlimited vacation policy in place isn’t an easy decision, and the transition isn’t always smooth.Give it a name. For some companies, calling it an “unlimited vacation policy” doesn’t work. Consider terms such as “flexible,” “self-managed,” or “personalized” when naming your policy.

1. Anchor in culture. Before starting an open vacation policy, consider why you’re doing it and how it benefits and fits the established company culture

2. Communicate. An open vacation policy is a two-way street. By giving employees flexibility with their time off, employees should return that with hard work and investment in the company mission. The organization should thrive just as employees do.

3. Provide guidelines. Companies that implemented unlimited vacation policies with no guidelines often found that employees took less time. Though a maximum or minimum shouldn’t be provided, give employees guidelines on how to take time off, when time can’t be taken off, and who can approve time off, if anyone needs to.

4. Focus on contribution. Instead of hours worked, focus on what employees are contributing. The focus shouldn’t be on how many hours a week each employee worked but if he or she completed what was needed of him or her and contributed to the success of the company.

5. Don’t focus on abuse. The point of an unlimited vacation policy is freedom and trust, so don’t put the focus on what happens if the policy is abused. Trust that employees won’t abuse the privilege.

6. Discuss plans. When possible, employees should communicate when they plan to take time off and for how long. Even if the plan allows for a short notice, this is a kindness that fellow employees and managers appreciate.

7. Celebrate with a launch. When the company puts an unlimited vacation policy in place, there should be a celebration and a launch. The launch should be full of information, guidelines, communication, training sessions, and Q&A.

If your company isn’t quite ready for an unlimited vacation policy, consider a shift in thinking first. Instead of giving employees a ceiling or a cap for the vacation days, give them a floor. Have a minimum number of days that employees should take off and encourage them to do so. Make time off a part of the company culture.

How an unlimited vacation policy benefits the company

An unlimited vacation policy isn’t only beneficial to employees—it also benefits the company.

We’ve already discussed how the policy instills goodwill in the company from employees, but there’s another benefit. Companies with unlimited vacation don’t have to track how much employees are owed for unused vacation time. And they don’t have to pay employees who quit or are laid off for unused vacation time.

Per employee, this could save the company an average of $1,898, according to Project: Time Off. In one year, U.S. companies carried forward $65.6 billion in accrued paid time off.

The dark side of unlimited vacation policy

As with all things, there are a few negatives with an unlimited vacation policy. Some companies that implemented open vacation policies have actually revoked them; they don’t work for every company.

Tribune Publishing rescinded their unlimited vacation policy after employees complained they felt their vacation days were being taken away. Some even threatened to sue over the lost monetary value of their accrued vacation days.

Kickstarter is another company that did away with their unlimited vacation policy. When Kickstarter found out their employees were taking fewer days off under their unlimited policy, they knew something was wrong.

Some employees have also raised concerns that open vacation policies are unfair to more senior employees. American work culture has typically used vacation time as a reward for years of service.

For some companies, the unlimited vacation policy simply won’t jive with the company culture. Consider companies that thrive on hourly work. When a company has a client-centric structure, it may not be possible to implement a policy of this kind.

Each company has a unique culture that must be encouraged, whether that means instating an unlimited vacation policy or sticking with traditional structure.

Interested in workspace? Get in touch.