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Unlimited Vacation Time - Risky Business

Unlimited Vacation Can Be Risky for Employers

The concept of “unlimited vacation time” has made its way into mainstream businesses, with leading companies like Groupon, HubSpot and Zynga implementing this type of new leave policy.

How unlimited vacation time works

Unlimited vacation time allows employees to take as much paid vacation time as they want and manage their own time. The belief is that if employees are allowed greater flexibility in choosing their vacation time, they are more likely to produce quality work when they are in the office, and that they are happier overall with their quality of life and work/life balance.

This approach to vacation time should also improve employee engagement, reduce turnover and lead to lower recruiting costs overall.

Of course, with an unlimited vacation policy, there are risks for the employer. Some companies worry that by allowing employees to choose their own vacation time, the necessary work won’t get done or that a small portion of employees may abuse the system/policy.

Setting company expectations and procedures

It’s too early to tell if these worries bear out, but MassPay advises that employers thoroughly discuss and add language to their employee handbook. Adjustments should include:

  • company expectations for unlimited vacation time
  • proper notification procedure(s)
  • definition of policy “abuse”
  • how the company will deal with abuse/consequences
  • how the policy interacts with other types of leave (FMLA, sick, maternity, disability, etc.).

Do not leave this policy vague – that’s just inviting trouble and will be hard to defend in a dispute. It may be wise to consult with an attorney on the last three bullet points.

What if employees won’t take vacation under your unlimited vacation policy?

Having an unlimited vacation policy is no guarantee that employees will take it!

That may seem counterintuitive, but Americans often do not take all of their earned vacation time. Among the reasons, the employee has too much work to take time off or fears losing the job.

As part of the rollout of such a policy, it will be important for HR to communicate the importance of taking time off to recharge, alleviate stress, connect with family and gain new perspectives. Anything you can do to allay fears about losing a job would also help employees feel more comfortable about taking time off.

Is unlimited vacation time worth the risk?

The United States trails far behind other countries in terms of vacation time offered, and how many hours of vacation people take. In fact, the United States is one of the only countries in the world that doesn’t require employees to take vacation time, and also does not require employers to offer paid vacation time. The Boston Globe reported in August that “nearly a quarter of the American private-sector workforce, around 26 million workers, doesn’t get paid time off.”

The side-effects resulting from a lack of time off include increased depression, anxiety and stress, a decrease in productivity, and potential safety issues/accidents in the workplace. Would unlimited vacation time address all of these issues or at least help reduce them? Probably.

Employers are addressing this issue in a number of different ways:

Unlimited Vacation Time – As we mentioned above, this is becoming a trend among some larger companies. While it is by no means “the norm,” employers that have instituted this method are finding that flexibility is good for business.

Forced Vacation Time – Companies are realizing that overworked employees are affecting their bottom lines, and some are even going as far as forcing their employees to take their time off.

Un-tracked Vacation Time – Some companies, like Netflix, are taking a more relaxed approach to vacation time, trusting their employees to decide for themselves when a vacation is appropriate.

How is your company addressing vacation time?

Do you find that employees who utilize the majority of their vacation time are more productive members of the workforce?