Netflix employees have it. Virgin Airline employees have it. As far as perks go, it’s one of the best. What is it? It’s unlimited vacation for salaried employees. As Richard Branson, Virgin Group founder, explains, “If working nine to five no longer applies, then why should strict annual (vacation) policies?” Unlimited vacation sounds great, so what’s the catch? There has to be one, right?
Too Good to Be True?
Although it’s still rare, unlimited vacation days policies are gaining ground. For employees, it means the days of scheduling a chunk of two or three weeks of vacation every year are gone. The basic idea is simple – employees take as much vacation as they like, as long as their work is done. Job networking company LinkedIn is one of the latest to offer unlimited vacation time. As of Nov. 1, 2015, approximately 6,000 of LinkedIn’s employees in the U.S. have had the freedom to take as much time off as they need.
Proponents of discretionary time off say that employees are happier, work better, produce higher quality work and have improved morale when they are given the freedom to balance work and life activities. LinkedIn chief human resource officer Pat Wadors says the purpose of unlimited vacations is to empower staff. There are benefits for the nation’s economy when people have more time off as well. Experts in the hospitality and travel industry hope that more days off means more airline flights, hotel stays and cruise reservations.
LinkedIn’s Wadors explains that employees are adults and don’t need to be micromanaged. There are limits, however, she points out. Most company’s unlimited vacation policies outline guidelines about when employees can take off. For example, Richard Branson expects employees to take time off only when their work is done and when their absence will not negatively impact business. And, here’s where the catch comes in.
When More is Less
One of the unexpected results of unlimited vacations is that employees often end up taking less time off than before. Why is that? It goes back to the reason Americans rarely take their allotted time even when they have accrued vacation: They worry they’ll lose their job, miss out on a promotion or not get a raise. Discretionary time off gives people the freedom to take vacation days along with the freedom to work more.
Critics point out that companies save in the long run when they offer unlimited vacations as a perk. Accrued vacation time must be paid if an employee leaves or is laid off. Discretionary vacation does not. The Project: Time Off initiative recently published a report that found the per employee average vacation liability for companies in the U.S. is $1,898. Steps to deal with such large liabilities include implementing a “use it or lose it” vacation program, where vacation days do not accrue into the next year, or adopting a discretionary vacation policy.
The jury is still out on whether unlimited vacation policies will benefit both workers and organizations. When there is a high level of trust between employer and employee, unlimited vacation can be a win-win for both sides.