Unlimited Vacation Benefit Considerations

June 2, 2018

While offering unlimited vacation is considered a trend, it differentiates a company as one that trusts its employees to do their best while enjoying their lives outside of work. This benefit may seem like a significant change. However, when executed within a culture of trust, the data points to this benefit as positively affecting individuals, their loyalty to the company, and overall organizational strength.

Large companies like LinkedIn, Virgin and Netflix lead the way and have offered unlimited PTO (paid time off) for years. Many start-ups also offer unlimited PTO from the outset as it fits with their culture of flexibility and mutual trust. Other companies have dipped their toes into the unlimited PTO water by offering the benefit only to executives and employees with a certain level of seniority.

While this recent unlimited vacation trend is seen as risky, most organizations offering the benefit note that their employees place it on the top of the list of benefits offered. To add, organizations feel that this benefit is a way to attract top talent. Workers take about the same amount of time off that they would have taken if they were given paid vacation days. On average, five total weeks are taken for vacation, personal days, sick days and holidays. 

Organizations supporting unlimited vacation or PTO have noted the following positive outcomes:

  • Work-Life Balance: Employees feel good about their whole life being acknowledged. Life demands and interests beyond work are seen as important and the organization understands not everything can be scheduled in advance.
  • Empowerment: Employees feel empowered and are responsible for ensuring their tasks and projects are completed regardless of the time they take away from the office.
  • Trust: Employees feel trusted and feel they have the ability to take time off, without question, as they need, not as dictated.
  • Connection to Mission/Core Values: Employees feel a greater connection to the organization’s mission and values.
  • Use It or Lose It Policies: There is no longer a rush to use up days at the end of the year.
  • Greater Productivity: Employees do not stress about taking needed time off and are often more refreshed/focused when returning from a break.
  • Reduced HR Tasks: HR can focus on more strategic initiatives versus tracking PTO.

With significant change, however, comes challenges:

  • Guidelines: Employees may be fearful of taking too much time off and some may prefer having specific guidelines to follow.
  • Autonomy: Employees must understand that unlimited PTO brings with it an increased level of autonomy and self-discipline in order to get work done and maintain expectations. Before taking an extended break, employees must understand they are expected to have a plan in place to ensure the work and other employees are not negatively affected. 
  • FMLA: While unlimited vacation policies may reduce some administrative support needs, employers subject to the Family and Medical Leave Act (FMLA) should still track and require proper documentation for any unpaid FMLA leave. A determination will need to be made whether all or a portion of the 12 weeks qualifies as unpaid FMLA leave and is included in the unlimited PTO/vacation policy and the separate FMLA policy should be referred to in the unlimited PTO/vacation policy.
  • Goal Setting: Potential abuse of unlimited time off is a concern. Goal setting and guidelines should be set for each role and reviewed on a regular basis to ensure extra time off is not affecting productivity.
  • PTO Payout: Employees using less than average PTO may see unlimited PTO as a negative if they have traditionally relied upon accrued and unused PTO payouts at the end of the year. If a large percentage of employees rely on these funds, an alternate plan should be considered.
  • Sick Leave: State and local sick leave guidelines should be reviewed and followed. A separate sick leave policy or additional language may be needed for employees in jurisdictions with specific guidelines.   
  • Job Limitations: Some jobs require workers to be physically present on a regular basis making unlimited PTO difficult to implement company-wide.
  • Minimum PTO: Some companies require a minimum amount of PTO to encourage employees to take time away from work.

If your organization is considering offering this benefit, Compass can help you determine next steps and build supporting guidelines to execute a successful launch. 

Sources:

Karsten Strauss, “10 Companies That Offer Unlimited Vacation,” Fortune.com, July 2017

Nathan Christensen, “We Offered Unlimited Vacation For One Year and Here’s What We Learned,” Fastcompany.com, November 2015


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