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May 13, 2015 / Molly Moseley

Unlimited Vacation: Benefit or Bunk?

shutterstock_221667787Summer’s almost here and vacation planning is in full swing. That means managers everywhere are busy balancing vacation requests against company staffing needs. Not an easy task. Could this delicate balancing act be solved with an overhaul of the corporate vacation policy? Some high-profile companies have done just that by throwing vacation time out the window and offering unlimited time off.

Unlimited vacation time is a trendy benefit, and a majority of American workers seem to be solidly in favor of it. In an Ask.com survey, 69 percent of the workers polled said they would be eager to take a job that offered unlimited vacation time.

Companies that favor the practice say it helps them attract and retain top employees. The idea is that employees blessed with such an awesome benefit will be inspired to perform at a higher level, will manage their time accordingly and not abuse their employer’s trust. They’ll be more likely to work during off hours, and work harder overall. That’s the theory, although I’m not sure it’s based on an entirely realistic view of human nature or the workplace environment.

Further, evidence suggests that unlimited Paid Time Off (PTO) isn’t going to work for every company.

“Unlimited vacation policies aren’t right for companies with large non-exempt populations,” says Liz D’Aloia, founder of HR Virtuoso Company. “When you consider that 59 percent of working Americans are paid an hourly wage, that tells us that this probably won’t be a viable solution for the majority of the workforce.”

D’Aloia also points out that certain businesses, like retail, restaurants, hospitality, health care and call centers, need to have a certain number of people in house at any given time. “It’s also often hard to measure individual worker productivity in these industries,” she says. Many unlimited vacation policies stipulate that a worker’s productivity should not be impacted by PTO, but as D’Aloia observes, for certain types of jobs, effectively measuring productivity may be a challenge.

Another factor to consider is the 31 percent of people from the Ask.com survey who weren’t that impressed by unlimited vacation policies. They may represent a group of employees who will not welcome such a policy. In fact, when newspaper conglomerate Tribune Publishing attempted to introduce such a policy, backlash from unhappy employees convinced the company to abandon the plan. Employees felt the proposal effectively removed the monetary value of vacation time they accrued; essentially, they would no longer be able to bank vacation days and receive a cash payout when they left the company.

D’Aloia reads a bit more into the employees’ response: “The staff rebelled. Clearly, the Tribune employees didn’t trust the management team to truly allow ‘unlimited’ vacation.”

In order for unlimited vacation to work at your company, a specific set of circumstances must be in place, D’Aloia says:

  • Your business is seasonal and has an exempt workforce, such as an accounting, tech or sales firm
  • You can easily measure productivity
  • A high level of trust exists between company and employees
  • You have the right culture for unlimited vacation to work

“In April 2014, Harris did a survey for Glassdoor, which revealed that a only a quarter of American employees with paid vacation took all their allotted time off,” she notes.  “Two in five said they only took 25 percent or less of their available time off. Do we really need unlimited vacation if Americans aren’t taking all of their available time off? Or is there another reason why Americans are stashing their vacation time?”

In the end, even having the right type of business – fully exempt workforce, easily measurable productivity, etc. – might not be enough to make an unlimited vacation policy workable for your company. A policy that tips too far in favor of either company or employees is sure to leave someone dissatisfied. And unless you can be 100 percent confident your employees will not abuse the policy, and employees completely trust that your company won’t use the policy to cheat them out of anything they feel they’re due, it may be impossible to create an unlimited vacation policy that everyone views as fair and balanced.