Unlimited Vacation Time Presents Pros and Cons for Employers

How sweet do the words “unlimited vacation” sound? Wouldn’t an organization that offers such a benefit be considered a progressive employer that must have the best and brightest candidates clamoring at its doorstep? The answer is more of a maybe than you would think.

Unlimited vacation is a buzzworthy benefits trend that has become increasingly popular in recent years. Basically, it means an employer eliminates caps on vacation time, and presumably, employees can take as much time off as they want as long as they are getting their work done.

When unlimited vacation policies are discussed, there seem to be a few common reactions. Some employers don’t understand how such a policy would work and wonder if their employees would ever work again, while others are perplexed about how they would administer unlimited vacation.

On the employee side, many employees think it sounds amazing and would love to have such freedom. However, some savvy employees think it’s a bad idea because they would be uncomfortable taking a lot of vacation without specific guidelines.

So is this something you should think about implementing for your workforce? Here are some pros and cons of unlimited vacation policies.

Pro: Recruiting, Hiring and Retention Tool

With the current jobseeker-friendly market and rising competition for talent in many industries, an employer needs to put itself in the best position to attract and retain the workforce it wants and needs. If implemented correctly, an unlimited vacation policy could be a great recruiting, hiring and retention tool for the right organizations.

Paid time off (PTO) is always one of the most coveted perks an employer can offer, and it is a key benefit in helping employees:

  • Achieve work-life balance;
  • Attend to personal needs;
  • Prevent burnout;
  • Decompress, de-stress and recharge their batteries; and
  • Maintain or improve morale and productivity.

If unlimited vacation is a perk that is becoming more common and desired in your industry, it could make your organization more attractive to potential jobseekers as well as current employees.

Pro: Promotes Vacation Time

Vacation is important to employees for many reasons and is key to achieving a healthy and happy workforce. However, many recent surveys and studies have shown that workers aren’t taking enough vacation. About half of Americans (51%) haven’t taken a vacation in more than a year, and many workers (38%) haven’t had a vacation in two years, according to Allianz Global Assistance’s annual Vacation Confidence Index. The index defines a vacation as “a leisure trip of at least a week to a destination that is 100 miles or more from home.”

The US Travel Association’s State of American Vacation 2018 revealed similar results, with 52% of American employees reporting that they had unused vacation days at the end of 2017.

If implemented correctly, unlimited vacation could help with this problem. Some organizations that have implemented such policies have reported:

  • Increased employee engagement, motivation and morale;
  • Higher productivity rates; and
  • Less employee burnout.

Pro: Saves Employers Money

Shockingly, unlimited vacation time may actually work out better for employers than employees because of how vacation accrual systems currently work at many organizations. Some employers allow employees to accrue vacation time and carry over some or all of their unused vacation days to the next year. However, accrued and unused vacation time may be considered an accrued liability and represent a considerable expense for the employer. Additionally, some state laws require the payout of accrued but unused vacation time upon an employee’s termination.

As a result, many employers will generally limit the amount of vacation time that may be carried over. Under a “use-it-or-lose-it” policy, if employees do not take the time to which they are entitled within the specified time frame, these days are no longer available to the employee. Although such policies may make it easier for employers to administer vacation time, they are not legal in all states.

Meanwhile, some employers have started implementing unlimited vacation policies to help out their bottom line since it often means they don’t have to have vacation banks as outstanding monetary liabilities.

Con: Haphazard Implementation

One problem with unlimited vacation is that different managers or supervisors may treat vacation requests differently. Under an unlimited vacation policy, employees are usually instructed to work out their vacation time with their managers, who have the discretion to approve or reject such time off requests.

Such a “discretionary” policy may result in different interpretations of what “unlimited” actually means. For example, some supervisors may approve vacation requests whenever an employee asks, while others require employees to show that they will be able to get their work done.

Con: Employees are too scared to actually take vacation

Although you would think an unlimited vacation policy would result in employees taking much more vacation time than under a standard vacation policy, many employees actually end up taking less time off than they would under structured PTO parameters. There are a variety of reasons for this surprising result.

First, under an unlimited vacation policy, employees don’t have to take vacation days by the end of the year or lose them under use-it-or-lose-it vacation policies used by many employers. This means there isn’t as much of an incentive for workers to really plan to make sure they are taking all of the vacation to which they are entitled.

Second, employees may also be scared to abuse their employer’s goodwill by taking off too much vacation. With vacation being “unlimited,” they may not know how to gauge what their employer will consider an abuse of the policy or how much vacation time is too much in the eyes of their employer.

Finally, some employees feel guilty about taking time off for various reasons. Without an allotted amount of days, they may have even more trouble determining how much time they can take off. This may be especially problematic for workaholic or overworked employees.

Importance of Time Off

If you are thinking about adopting an unlimited vacation policy, the key is making sure it’s the right fit for your organization and feeling confident you can implement it in a way that it will be successful and something your employees are excited about. It will be important to help your workforce understand:

  • What such a policy entails;
  • What it means for them; and
  • How it will work in practice.

This means it is vital to provide guidelines and outline expectations for your employees. Make sure you review the policy with your workforce so they know what is and isn’t allowed.

Even if unlimited vacation is not the right answer for your workforce, you may want to reevaluate your current vacation and paid time off policies. A private employer is not required by federal or state law to provide paid or unpaid vacation time. However, most employers find that providing vacation not only keeps them competitive in attracting new talent but also with retaining their current talent.

Since the problem of workers not taking enough vacation appears to be prevalent, employers also need to encourage employees to plan and take annual leave. This involves creating an organizational culture that values employee wellness and work-life balance. It also entails having managers and supervisors lead by example and take their own vacation time, whether it is set at certain allotted amounts or unlimited.

What do you think about unlimited vacation policies? Share your thoughts by leaving a comment below.


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