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Is unlimited time off a benefit or a boondoggle—and for whom?
Is there any workplace issue as vexing as vacation? Whether
it is organized as a single block of days that includes sick
time or as its own separate category, the benefit brings
about all kinds of contradictions, resentments and perverse
incentives among employees.
There are people who complain of stress and overwork yet
refuse to take time off. Then there are those who come to work
sick, fearful of giving up a day they might want to use months
down the road. And what about employees who routinely take
sick days when they’re not sick or who have an extremely liberal
interpretation of the term “mental health day”?
Recently, leaders at many companies have begun to wonder
what would happen if they did away with limited time off altogether.
What if managers told employees to take all the time they need, as long as their work gets done?
The answer to that question is unfolding as more employers
experiment with so-called unlimited vacation time. While
relatively few companies offer it—experts estimate about 1 in
100—leaders at those that do say it works swimmingly. The
pressure to plan and save days is eliminated for workers, while
employers are freed from the administrative hassle of tracking
time off and the financial burden of paying out unused vacation
time. It’s a win-win, right?
In some circumstances, perhaps. But it’s not right for every
company, a lesson that Tribune Publishing, which owns the Los
Angeles Times, recently learned the hard way. When the company’s CEO announced in November 2014 plans to roll out a “discretionary time off” policy—in which employees would have no
more set vacation, holiday or sick days and instead would work
with their managers to determine their time off—the staff of the
Times and other Tribune papers rebelled, with some threatening
to sue. The policy was rescinded less than a week later.
Meanwhile, at Netflix, Virgin America and other companies,similar policies have been lauded as the next great workplace perk. Semantics may explain part of the differing reactions:
“Discretionary time off” certainly doesn’t sound as appealing
as “unlimited vacation.” But the real key, experts say, lies in
knowing your culture.
For example, “If employees don’t trust the management,
that’s a reason to look at this skeptically,” says Fred Shilmover,
CEO of InsightSquared, a Cambridge, Mass., business analytics
firm that has an unlimited vacation policy for its 100 workers.
The Motley Fool, an Alexandria, Va.-based financial services
firm with more than 300 employees, holds itself up as a success
story. “For us, the policy is the same for both sick time and vacation:
Take what you want, take what you need,” says Samantha
Cicotello, senior vice president of customer delight. The company
claims to have been the first in the United States to adopt
an unlimited vacation policy. “We don’t even track it,” she adds,
though she estimates that workers
typically take about three to
'For us, the policy is the same for both sick time and vacation: Take what you want, take what you need.'—Samantha Cicotello, The Motley Fool
Sometimes employees will
take a couple of weeks off to
travel overseas, while other
times they just want to spend an
afternoon taking their kids ice
skating. “What we want to do is
make sure that they’re refreshed
and have time to reflect and disconnect,”
Workers and senior managers claim to understand the importance
of paid time off, but when it comes to actually taking the
time, both are reluctant. The typical U.S. employee with paid
vacation time took just a little more than half of his or her allowed
time off in the previous 12 months, according to an April 2014 Harris survey conducted for Glassdoor. Just a quarter reported
taking all the time off given to them, while 2 in 5 said they had
taken 25 percent or less of their available time off.
A full 15 percent had not taken any paid time off at all. “People
were already not taking vacation time when they had it on a
platter,” says Anita Beshirs, chief culture officer, U.S., at the San
Francisco-based global communications firm Grayling, which
has a no-limits vacation policy for its U.S. workers.
That doesn’t serve the company any more than it serves the
worker, since exhausted employees are less likely to be productive
and committed to their work, and burnout has been shown to be
a key factor in employee disengagement. A Gallup study of workers
monitored in 2011-12 showed that just 13 percent worldwide were “engaged” at work. In North America, 52 percent were “not
engaged,” meaning they lacked motivation and were less likely to
invest discretionary effort in organizational goals or outcomes.
Another 18 percent were “actively disengaged”—unhappy,
unproductive and liable to spread negativity to co-workers. Gallup
estimates that the annual cost of disengaged employees in lost
productivity is between $450 billion and $550 billion.
Studies have shown that people have limited attention and
that job performance is improved by both short and long breaks.
Indeed, more than 90 percent of HR professionals believe that
vacation improves wellness, morale, performance and productivity,
according to the Society for Human Resource Management’s (SHRM’s) 2013 Vacation’s Impact on the Workplace survey report.
Some companies are finally getting the message. The digital sharing
company Evernote, for example, withholds a $1,000
bonus from workers who don’t take off an entire week at a time
during the year. Cicotello at The Motley Fool is also a strong
time-off advocate: “[Workers] are going to get burned out pretty
quickly if they don’t take that time to renew and refresh.”
So would employees take more re-energizing time off if there
were no limits? Many managers say yes, but others believe workers
might feel pressured to stay on the job to impress the higherups.
And, with no one wagging a finger at them to take time off
or lose it, employees might be inclined to just let the time slide.
“It’s like going to the gym,” says Steven Parker, SPHR, head
of business transformation at Achievers, an online rewards program
for company employees. The intent is there in theory, but
“the next thing you know, you’ve
only worked out five days in the
year. And you don’t get those days
Unlike other nations, the U.S.
has no laws guaranteeing paid
vacation time for anyone. The
Family and Medical Leave Act provides
for up to 12 weeks of unpaid
time off for births, adoptions and
health problems, but it applies
only to companies with 50 or more
For those who have become accustomed to getting a set number
of vacation and sick days, unlimited vacation policies require
a fundamental change in the way they view paid time off. Instead
of looking at it as part of the compensation package—a perk
that grows with time invested at the company—taking vacation
becomes less of a “benefit” than a necessity for remaining energized
The shift in mindset may be a harder adjustment for more experienced
workers who believe they should be rewarded for
their tenure with more paid time off. Millennial employees, on
the other hand, don’t see their career paths going that way; they
expect to work at many companies over their lifetimes.
“A generation ago, you might have spent an entire lifetime at
one company. That very rarely happens now,” says Shilmover.
“The reality of employment today is that people do change jobs
rapidly.” So rewarding tenure with more vacation is not a great
strategy, he adds.
Is Unlimited Vacation Right for You?
Employees are paid an
Employees have feast-or-famine
as in the tech and sales
Productivity is not
Productivity is easily
Employees work in
retail or other industries
that need a set number
of people on the job at
any given time.
The culture is one of high
trust between employees
Employees have the
freedom to structure their
The key to getting an unlimited vacation policy to work is to create
the right culture. That means setting a standard of mutual
trust, where both worker and employer trust each other not to
abuse the system.
“You need to be respectful of your co-workers and your clients
and get them what they need,” says Mary Beth Wynn, vice
president of people at Jellyvision, a Chicago-based multimedia
production company with 180 employees that offers unlimited
vacation. “Beyond that, we leave it up to you to let us know what
you need to be healthy and happy. And we leave it to the manager
to address the reasonableness. It’s a system that requires trust on
both sides. We trust our employees not to abuse it, and employees
have to trust us that the flexibility is really going to be there.”
'We leave it up to you to let us know what you need to be healthy and happy. And we leave it to the manager to address the reasonableness. It’s a system that requires trust on both sides.' —Mary Beth Wynn, Jellyvision
Flexibility, however, doesn’t mean there are no rules at all.
HR should issue a companywide memo explaining what is
expected of workers before they take time off, the amount of
notice required and the process for getting approval, says Matt
Mickiewicz, CEO of Hired.com.Not only does this give workers
a sense of security, but “it also creates a forcing mechanism, in
that companies are required to articulate goals and hold quarterly
performance reviews to hold people accountable based on
results, rather than days in the office,” he says.
Wynn and others acknowledge that it is hard for workers to
come to a company with an unlimited vacation policy after having
set time off; younger workers, especially those in firms that
have feast-or-famine workloads, such as tech and sales fields,
tend to be more adaptable. “In general, these types of policies
work the best when the productivity of the employee is easily
measured,” says Kim Cassady, senior director of talent at Cornerstone
OnDemand, a Santa Monica, Calif.-based HR services
So, for example, if a salesperson meets her target early in the
year, it may be entirely reasonable for her to take a break, even an extended one. But for other jobs—those paid by the hour, for
example, or positions where it’s not as easy to determine if the
employee is achieving joint goals—unlimited vacation may not
be a useful policy for either the company or the employee.
An unlimited vacation policy can eliminate the paperwork and
scheduling that goes into managing vacation time. “It makes it
so much easier to administer. People are either getting their work
done or they’re not,” and time off should stem from that, says Paul
Millard, managing partner of the IT/tech recruiter The Millard
Group, based in Middletown, Conn. He says the policy works well
in his 20-person office with simple conversations between managers
and workers. Millard compares managing a staff to raising
kids: “They need structure, but they also need freedom.”
Financially, companies are in a position to save from adopting
unlimited vacation. It’s not because they’re counting on employees
not to take much vacation; it’s because workers can’t stockpile
their days for a big payout when employment ends, creating
an unofficial severance package. Some companies keep this in
check by allowing employees to carry over a maximum number
of days into the next calendar year. In California, however, state
law bans use-it-or-lose-it vacation policies, requiring companies
to pay out all accrued, unused vacation time upon a worker’s
departure, explains labor lawyer Chris Boman, a partner with
Fisher & Phillips in Irvine, Calif.
“A lot of companies believe their employees are abusing
the vacation system,” Boman says. While employees may not
be taking formal time off, he continues, they may not be fully
functioning at work, either, whether because they are slacking off
or taking pockets of unrecorded time. “I think the knee-jerk reaction
for employees may be, ‘I’m losing a benefit,’ ” Boman says,
“when really [employers are giving] a compliment to the workforce,
saying, ‘We trust you to be accountable professionals.’ ”
Parker, however, sees a colder calculation. “The real reason
[for a change to an unlimited vacation policy] is that there’s a significant
impact from a financial perspective.” Legally, he says,
HR and the chief financial officer have to account for all unused
and accrued vacation as a liability on the balance sheet—an
amount that he says could run into the millions for some companies
when each worker is carrying an average of $2,000 to
$4,000 in vacation-in-waiting.
If You Go Unlimited
Experts advise the following actions to make
an unlimited vacation policy work:
Clarify your expectations. Most companies demand that
employees get their work done first—meaning they don’t
leave in the middle of a product launch or looming deadline.
Establish and communicate the process. Do people need
to give a certain amount of notice before taking time off?
Will it require a manager’s sign-off?
Set an example at the top. Regardless of how much you
encourage workers to take time off, they’ll likely be afraid
to take a break if they see that their managers are always in
Don’t keep track of vacation time, except when workers
aren’t using any. While some employees may exploit the
benefit, the bigger problem is people who come to work sick
or fail to take a needed respite.
In the unlimited vacation paradigm, workers need to take responsibility
for their own schedules and make sure they’re getting
what they need out of the bargain. “It sounds like a cool idea: You
can really take as much time as you need, and you don’t worry
about taking time off to care for a loved one, or to go see a yoga
instructor in Bali,” Parker says. But in reality, workers might end
up losing, letting time fritter away and then having nothing to
show for it on the day they leave the company.
Part of the process may be overcoming our cultural reluctance
to vacation, which was aggravated by the recession, says Bruce
Elliott, manager of compensation and benefits at SHRM. Even
with the economy improving, many workers are wary. “Employees
for the most part are really afraid. We’re uncertain about
our jobs, and that’s one of the reasons we don’t take time off,”
The solution, Wynn says, is for leaders to set an example by
taking vacation and personal days with no apology. At Jellyvision,
for instance, “there is public communication of, ‘I’m not
available because I’m doing things that are important to me.’
That comes down from the top,” she adds.
In the end, people who shy away from using vacation time will
likely do so whether or not it’s a guaranteed benefit. So it may
take a larger national culture shake-up to convince Americans
they deserve a break.
Susan Milligan is a freelance writer based in Washington, D.C.
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