The Pros and Cons of Unlimited Vacation

The Pros and Cons of Unlimited Vacation

Table of Contents

Is unlimited time off a really good idea? 

Getting as much time off as one wants sounds like a dream come true, yes? Who wouldn’t be tempted by the idea of being able to take as many vacation days as they wished, with their organization’s blessing?  With unlimited time off, employees can choose how often they want to take a vacation, when, and for how long. The concept first appeared in the early 2000s in Silicon Valley and was made famous by Netflix in 2004. 

Now, all over the world employers are letting themselves be tempted by this philosophy of work. Start-ups in the digital technology sector in particular, try to adopt unlimited vacation or time-off to encourage employees to take vacations for a better quality of work-life balance. 

In itself, the idea of unlimited vacation has several advantages 

For employees, the ability to take advantage of unlimited vacation is a great source of motivation. It can empower employees and augment their autonomy and well-being at work. It encourages employees to give the best of themselves and allows them to find a better balance between personal and professional life. 

Offering such an incentive allows organizations to promote the employer brand, strengthen their attractiveness to candidates, keep top talent, and concretely show commitment to creating a climate of trust.  

But does unlimited vacation time-off really mean “unlimited”? The expression “unlimited vacation” seems to be misleading in this context because there are obvious limits.  

In a traditional operation, the business sets limits on when and for how long employees can take vacations.  

The question when talking “unlimited is: what are the criteria that determine the number of days of leave employees can take? “Flexible” or “extended”are better terms that make the concept less ambiguous. Management has more latitude to set general policies and rules about employee time-off while giving individuals the freedom to schedule their time-off as they see fit. 

Unlimited vacation is attractive on paper, but has some limits and may present risks in practice

  • Employees may feel guilty about taking “too much” time off and take less than they would in a conventional system. This situation has been observed, especially in start-ups, where employees, who have unlimited time off, fail to take enough. 
  •  If one person takes five weeks of vacation in a year, while others take only three, it can be seen as a lack of involvement or commitment. Social tensions can result, creating pressure, competition, and jealousy. Camaraderie and team spirit can deteriorate. 
  • Unlimited time-off is not suitable for all businesses. Members of production teams, health care, call centers and work organized around shifts, cannot be away as freely as office workers. These differences can create unequal treatment within a company and increase turnover. 
  • When goals and expectations are set very high, the inability to schedule time-off can contribute to vacation inequities. 
  • And as employees come and go on vacation, fluctuations in team and individual activity levels can impact company performance. 

Engagement and pulse surveys are a great way to ensure your workforce and organization are aligned on the chosen vacation policy, and to ensure minimal workplace disputes or disruptions. 

Administrative and legislative considerations associated with flexible vacation policies

Suppose a company decides to scrap traditional annual leave policies to let employees take as much time-off as they like. In that case, management needs to consider some critical questions: 

  • Is this type of vacation time-off policy suitable for the company? 
  • Can it be equitably administered taking into consideration different jobs and career streams? 
  • What is the legislative and administrative context of implementing such a policy in the different jurisdictions where the organization operates? 

In the U.S. for instance, the Fair Labor Standards Act (FLSA) “does not require payment for time not worked, such as vacations, sick leave or federal or other holidays. These benefits are matters of agreement between an employer and an employee (or the employee’s representative).”   

Conversely, the Canada Labor Code provides annual paid vacations explaining that: … an employee must complete a “year of employment” to be entitled to a vacation. The amount of vacation pay for that vacation is based on the wages earned by the employee during that “year of employment”. 

Therefore, for organizations based in Canada a good way to meet legislation under a flexible vacation policy is to: 

  • Set a minimum number of employee vacation days/pay per individual  
  • Carefully word the organization’s vacation policy to ensure minimum employment standards are met 
  • Establish clear rules such as the notice period (two weeks/one month) employees need to give their immediate manager prior to taking time off, and the maximum number of days that can be taken at one time 

As for administering a flexible vacation policy, time away from work must be properly tracked as either “vacation” or “time-off”. The data captured in HRIS can be used to measure how effective the new policy is, how employees are using it, and reveal where changes may be in order. 

Evaluate your company culture, the mindset, and actual needs of your employees  

Today’s employees need to feel autonomous and responsible. The flexible time-off policy could align perfectly with a corporate culture based on flexibility and trust, and where performance is measured by results rather than attendance. 

Developing a corporate culture is a continuous process of improvement that ensures employees feel good about their employer and believe they have a pleasant and promising future.  

Employees are a significant source of information to drive the organization. 

Regularly monitoring levels of satisfaction about communication, career development, recognition, motivation, relations with immediate superiors, relations with co-workers, teamwork, and work organization ensures the proper functioning of teams and enhances individual feelings of engagement. HR (Human Resource) surveys are informative strategic tools that facilitate day-to-day and longer-term decision-making.

Specialized survey vendors (such as WorkTango) help organizations establish a continuous evaluation process and build a corporate culture centered on the employee experience.  Book a demo below to talk to an expert today!