Do Unlimited Vacation Policies Work?

An unlimited vacation policy sounds like a prescription for chaos and abuse.  But businesses are embracing this concept in growing numbers.

The Society for Human Resources Management (SHRM) reports that only 1% of U.S. companies offer unlimited vacations.  But this number is growing.  Included are technology start-up companies which can be flexible with employee time-off, including HiringThing.com, a job placement software company, and Evernote.com, a firm devoted to online note taking and archiving.

But they are not alone.  Larger organizations offer unlimited vacation day policies, include Netflix with 900 employees and Best Buy retail chain’s 4,000 corporate employees.  IBM’s policy has covered each of its 355,000 employees since 2003.

The Right Culture

This type of flexible policy fits technology organizations, and may not work for businesses such as hotel and restaurant, or manufacturing facilities where the work delivered depends on employee attendance.

The organization must have the “right culture” for this policy to succeed.  This includes an atmosphere of trust that emphasizes personal responsibility.  Employees must care about their work and the organization.

Developing an Unlimited Vacation Policy

Clearly, these types of paid time off arrangements are not “unlimited;” rather, they are extremely flexible.  When implementing this type of policy, consider the following:

• An unlimited policy doesn’t mean “no policy” – craft one that clearly establishes parameters like eligibility, limits and procedures
• Create a standalone vacation policy or incorporate it into a Paid Time Off policy which can include sick days and flexible work schedules
• Limit the number of consecutive weeks (for example, three weeks maximum)
• Require manager approval based on project status, and specify that managers can deny vacation requests if business demands
• List any frozen zones (such as the month of December for retail organizations)
• Quantify the amount of advance notice required

It’s important to build processes around the policy so that projects are covered and client relationships are maintained during absences.  Be sure to train all managers and supervisors on communicating the policy and implementing it in their work groups.

Also, check with legal counsel on the applicability of state law to both the policy and its transition.

The Positives

Each company that offers an unlimited vacation policy agrees that it’s a big administrative timesaver.  The time costs of completing timesheets for exempt employees and tracking vacation days are eliminated.

Most organizations with unlimited vacation policies report no policy abuse, and experience better productivity.  Some employees actually use fewer vacation days so as not to be viewed as a “slacker.”

Work gets done as employees are highly motivated.  Additionally, the trust factor leads to better relations between employee and employer.  Employees feel that they are treated as adults.  After all, since you hired them to be responsible about work, they should be responsible about paid time off too.

An unlimited vacation day policy can be a huge recruiting tool.  It’s also a low cost way to retain employees who may have recently experienced minimal pay increases and loss of bonuses.

Implementing this type of policy can help your employees regain work-life balance.  But it’s not right for every business.  An organization with a culture of openness, employee responsibility and accountability, and above all trust, will benefit from an unlimited vacation day policy.