4 Lessons About Unlimited Vacation

Unlimited vacation policies, which have become a fixture at tech companies and among start-ups, are now being widely adopted by older companies in traditional industries throughout the U.S. It's easy to see why. Employees respond positively to these policies, with 72 percent expressing interest in receiving unlimited paid time off (PTO), according to MetLife's 2019 U.S. Employee Benefit Trends Study, which interviewed 2,675 full-time employees last year.

But how well does unlimited vacation work in practice? Early adopters of unlimited PTO policies say they've learned four important lessons that led many of them to modify their policies.

No. 1. 'Unlimited Vacation' Isn't Unlimited

Unlimited vacation policies do not, in fact, allow employees to take an unlimited amount of time off. It's more of a marketing tool for recruiting talent than a literal interpretation of vacation policy. "We offer it because all of our peer companies do, and we don't want people to compare us to other companies unfavorably," said Jonathan Wasserstrum, founder and CEO of SquareFoot, a commercial real estate and technology firm based in New York with about 60 employees.

The company has established certain parameters for appropriate use of unlimited vacation. "A handful of employees use four to six weeks of vacation," said Wassertrum. "If they are performing well, we don't care. If they are not performing well, we need to have a conversation" about vacation use.

Carinsurance.net, a car insurance shopping portal with 30 employees based in Bellevue, Wash., doesn't place a specific cap on the number of vacation days employees can take but "we allow management to use their discretion in case an employee abuses their privilege," said company founder Tony Arevalo. "I would say anything more than 40 days off per year would fall into that category, but no one has even come close to that."

No. 2: Underuse Can Be a Bigger Problem than Overuse

A more common problem with unlimited vacation is that employees may end up limiting the amount of time they take off, sometimes taking far less than the average two weeks most employers offer. Employees taking too little time off is often even more problematic than employees taking too much. For example, Wasserstrum shows the need for time away from the office by taking off three or four weeks a year and encourages his employees to follow suit or to take at least two weeks off.

Pittsford, N.Y.-based accounting firm The Bonadio Group established unlimited PTO to help employees deal with the stresses of the firm's extremely compressed "busy season" during tax preparation time in winter and early spring. "We've found that flexibility is extremely important to both current and prospective employees," said Heather Rudes, senior director of human resources. However, to keep employees from taking off too little time throughout the year, the firm requires that its employees take at least 120 hours of PTO annually, including at least five consecutive business days. "This helps prevent employees from taking days here and there throughout the year without an extended break from the office," she said.

[SHRM members-only policies: Unlimited Paid Leave Policy (Exempt Employees)]

No. 3: Monitor Time-Off Distribution

Giving employees the freedom and flexibility to take time off whenever they want can create new management challenges due to understaffing and delays during projects if key team members are not available. To prevent that, "we had to introduce a master calendar that tracks who's in the office and who isn't," said Pete Sosnowski, head of HR for career site Zety in Warsaw, Poland. The company has 82 employees. Tracking helps the company "anticipate upcoming absences and cover all the bases in time."

On the other hand, carinsurance.net found that its unlimited vacation policy helped employees to manage their time off better. "They distributed their vacation time over the course of the year instead of in bulk during the holiday season," said Arevalo, probably because they didn't feel pressured to "save" enough time off in case it was needed for the end-of-year holidays. This, in turn, led to fewer gaps in work coverage during the holidays, since there was no pressure to "use it or lose it" at the end of the year.

No. 4: Commit to the Policy

Unlimited vacation time can reduce the administrative burden involved with tracking time off, including unused vacation carried over from year to year. For some employers, administration and tracking are beside the point. These employers emphasize that unlimited vacation policies should be based on trust with no need to track the amount of vacation employees take. "That's part of the benefit of having the policy in the first place so we don't have to waste time on administrative tracking of PTO and can instead use our time on more strategic people initiatives," said Emma Brudner, director of people operations at Lola.com, a travel management app with 115 employees. Besides, "hours worked doesn't usually correlate with performance for knowledge workers."

Brudner noted that for most employees, unlimited vacation policy is less about spending weeks at the beach and more about managing their lives more effectively. Unlimited vacation is often about "a parent taking an afternoon off to see her child in a school play, or someone with a chronic illness not having to carefully allocate vacation time so they can go to regular doctor's checkups," she said.

"Often, people will be more committed to their jobs when they don't feel nickel and dimed with time off, especially when that time off represents having to choose between work and taking care of themselves, or fulfilling their other obligations in life," Brudner noted. As such, she sees the policy as a crucial tool for attracting and retaining key talent, including individuals who are parents or caregivers, have disabilities, and just need flexible out-of-office time.

Joanne Sammer is a New Jersey-based business and financial writer.

Related SHRM Articles:

Unlimited vs. Limited PTO: Which One Is Right for Your Workplace?, SHRM Online, January 2020

Viewpoint: Is Unlimited Vacation the Wave of the Future or Potential Liability?, SHRM Online, January 2019