An increasing number of North American companies have started to offer their employees Unlimited Vacation Policy to boost morale, and also as a recruiting tool to draw more candidates.
There are different variations to the policy & and it is referred to by multiple names – “Take What You Need Policy” or “Discretionary Time off Model” or “Results Only Work Model” or “Flexible Schedules Policy” or “Unlimited PTO” – it is essentially the same thing. The Policy allows employees to take as much vacation as they please (at-least by definition).
In the Traditional Vacation Model (X Number of Days Per Year)- employees were allotted a specified number of days or weeks per year. The number varied based on the local labor laws, seniority in the company, etc.
In some cases, if you are a smart candidate you could negotiate your vacation time before accepting the job offer.
However with the popularity of Unlimited Vacation Policy, and the increasing number of companies that are adopting it – it provides every employee in the company a level-playing field. For instance, you no longer have to work 3 years to earn another 3 days of vacation.
In a study conducted by the Society of Human Resource Management, only 2 percent of US companies have formally adopted such a model. About 60% to 80% of Bay Area startups offer an Unlimited Vacation Policy. Recently non-tech companies such as General Electric and Grant Thornton have adopted the model.
I can imagine how you as a candidate are excited about accepting the job offer because of a company’s Unlimited Vacation Policy. But before you make a decision, I want you to understand how they work, what the pros and cons are, etc.
My goal is to make this post an educational article for you to understand how an unlimited vacation policy works, so that can make an informed decision before you accept that coveted job offer.
1. It’s Not Unlimited
OK, let’s be realistic here, and you probably already sensed this. Just because it is unlimited does not mean that you take all Mondays off. You don’t get to make every weekend a long weekend. And you can’t take months off on end. There are some limits and this is within reason.
Look at the Unlimited Vacation Policy as a flexible work schedule. In most companies that have adopted the model – employees can time off as long as they have worked it out with their managers & peers. Another important caveat is that you get your work done before you can take time off.
Employers expect that you work your ass off, and use the flexible vacations to recharge – so you return to work and be more productive.
2. Employers Save Money
Ever sent a vacation request to your boss. No matter what the size of your organization is – they usually have some type of software/system to manage vacations. To build & implement a system like that costs a significant amount of money. So there is an immediate cost saving for a company because it does not have to invest in new systems. In some cases, workflows and vacation request systems can cost up to tens of thousands of dollars.
It typically takes managers some time to administer vacation requests. This time does add up depending on the number of people in his/her team. It is hard to calculate lost costs because of administrative functions. However, it is a cost that can add up over time.
Plus, traditional organizations have to payout employees accrued or unused vacation times (based on legislations & labor laws). There are some cost savings when companies adopt an unlimited vacation policy. In a recent study, the bottom line savings for companies could be as much as $1898 per employee. This is a combination of administrative costs, unpaid vacation costs, etc.
In most cases, this is a no-brainer for any employer.
3. Improves Workplace Morale
The policy gives employees a sense of ownership over their time. It provides them an illusion that they do have more control over their time. It extends a degree of trust. In many cases, employees appreciate the trust and flexibility that is bestowed upon them.
It also shows that a company views an employees’ life holistically – that employees are not only worker-bees but also have a life outside work. Employees love this fact.
This shifts the workplace from a punch-the-clock model to a results-only-model. And breaks out the monotony of work.
In other studies, it has been proven that taking a vacation can boost professional productivity and job satisfaction. Taking time off helps one to recharge their batteries and overall wellness.
So on paper – it looks good for a prospective employee. It seems that a particular employer cares about their well-being and treats them as responsible adults.
4. You Might Never Take Unlimited Time-Off
I mentioned above that there are financial benefits for employers when they offer unlimited vacations.
There is another point that is rarely discussed.
Companies that offer an unlimited vacation policy do so because they know for sure that their employees won’t take much time off.
There are a lot of reasons why employees don’t use all their vacation time. Sometimes it is a demanding work environment, peer pressure, fear, etc.
In a 2014 Glassdoor survey, it has been revealed that only 1 in 4 employees took the total allotted/accrued vacation time. And about 15% of employees never took a day off.
Even if they are on vacation, does not mean that they are necessarily off work. Most of them get access to work through their smartphones or computers.
About 28% of surveyed are afraid that they might not get ahead if they are not constantly working.
About 17% are afraid of losing their jobs – so they work even on their days off.
So even if a company institutes an unlimited vacation policy – it does not mean people are necessarily taking time off. Kickstarter had to curb its unlimited vacation policy and go back to offering its employees a finite (25 day) vacation policy. Evernote decided to provide their employees $1000 to Disconnect from work from taking a vacation.
As a quick summary, I would like to highlight that there are benefits for employers to offer an Unlimited Vacation Policy. It provides them immediate cost savings. It improves workplace morale, thereby reducing turnover.
For employees, there is an increase in morale knowing that their workplace offers them more flexibility and trust.
However, as the studies have shown that – just because it is offered does not mean most employees make use of it.
Perhaps, a particular workplace is a high-pressured and stressful workplace. And the demands, expectations & internal competition is high. And these things are hard to determine by just reading the Benefits Package.
In the end, it should not be the only reason you choose a prospective employer. Before you decide to join the organization, I strongly encourage you to spend time to learn a little bit about the internal culture.
If the ideas & studies resonate with you, feel free to share your thoughts below!!