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Are Unlimited Vacation Policies Good for Business?

Are Unlimited Vacation Policies Good for Business?

By: Reva Nelson

Unlimited vacation policies, sometimes referred to as discretionary or flexible vacation policies, have garnered increased attention over the last few years. Companies big and small have adopted these “take as much time as you need so long as you get your work done” policies, including Netflix, Virgin Group, General Electric. Professional services firm Grant Thornton recently made the switch. 

Despite these high-profile cases, unlimited vacation policies have yet to become widespread. According to 2015 data from the Society of Human Resource Management, less than 1 percent of U.S. companies offer unlimited vacation.

Why haven’t these policies been more widely embraced? Certainly, most employees, and especially flex-minded Millennials, find unlimited vacation an attractive concept. Yet many employers are leery that such a program will lower employee productivity or lead to burnout if employees take too little time off. 

Interestingly, the debate has prompted many savvy employers to re-examine their vacation, paid time-off, and flexible work arrangement policies. 

Here are a number of questions HR professionals and senior leaders are asking in the context of unlimited vacations policies:

Can flexible vacation policies reduce costs?  
In a traditional vacation policy, employees either accrue vacation time throughout the year, or start off the year with a bank of days. If employees leave the company before using their accrued time, they are typically paid for their unused time. 

Companies with unlimited vacation policies don’t have to carry any liability on their books for unused time off. This has the potential to save companies $1,898 per employee, according to research from Project:Time Off

An additional bonus for companies: HR administrators are freed from the hassle of tracking time off, enabling them to focus on more strategic, value-added activities. 

How do we attract and retain the best talent?
Adam Justice is vice president of Grid Connect, a manufacturer of smart sensors for industrial and consumer use. The 30-person company has been offering unlimited vacation to its employees for the past 12 years. 

“We’ve never had a vacation policy; we never felt it was needed. Our basic policy has been, ‘Take what you need; don’t abuse it.’” The good news is, employees haven’t abused it. 

According to Justice, flexible time off is only part of their company culture, which is focused on attracting loyal, top talent to its Naperville, Ill. firm. At Grid Connect, that culture is highlighted by a number of unique employee benefits, such as free lunch on Wednesdays, chair massages on Thursdays, and daily ping pong matches that culminate in a year-end championship. 

How are we supporting our employees’ morale and productivity?
Employees, by and large, offer an enthusiastic, “Yes, please” to the prospect of unlimited vacation. But employees don’t necessarily rank a long vacation as a top benefit — workplace flexibility and work-life balance are often just as important. 

The verdict is still out for some companies. Jason Carney, director of HR for WorkSmart Systems, an Indianapolis-based human resources outsourcing firm with 30 internal staff, doesn’t think unlimited vacation plans are right for most employers or employees. 

“Not every employee can handle the unlimited time-off set up. Some take too much advantage of a good thing and their performance ends up suffering. On the other hand, there are workplaces where employees end up never taking any time off, because the company culture doesn’t lend itself to a lot of flex time.”

Certainly, this is a risk for employees with unlimited time off. An unlimited vacation policy requires the right mix of a supportive company culture, regular encouragement and role modeling from higher ups. Employees can otherwise become nervous about taking time off, leading them to use less time than they would under a more formal structure of allotted days. 

Of course, it’s worth noting that a supportive culture, encouragement from supervisors and positive role modeling are important in any organization. 

Where do we have room for workplace flexibility?
Carney urges employers to look more broadly at how they can offer much-needed flex time to employees. “What can you do to be more flexible with your workforce? I’d like to see more businesses go in this direction,” he says.

Is offering an unlimited vacation policy the right move for your company and employees? There’s no right answer, since every company, workforce and culture is distinct. Even if the answer is no, it’s important to periodically ask yourself whether your benefits and time off policies successfully address the needs or your workforce and your organization. 

Simply put, your success is driven by your people, making it important to understand what motivates them — whether it’s unlimited vacations, office ping pong or the ability to telecommute when the baby is sick.