Unlimited Holidays: Are they really a clever HR move?

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Bean bags, free lunches, gym memberships and rooms full of puppies – just a few of the incentives some businesses have adopted in recent years to give them recruitment edge. Whilst all these sound great, the incentive which may be the most alluring of them all is unlimited holidays.

First used by innovative smaller start-ups, unlimited holidays have started to be offered by bigger companies like Netflix and Virgin Group. Whilst it could be viewed as just another over the top perk used by management to compete for talent, some are claiming it could potentially actually save businesses money.
So, if you are intrigued by the idea of introducing an unlimited vacation policy within your business, take a look at these pros and cons first:

An incentive for new employees could make recruiters’ jobs easier

There’s no doubt workers today favour those who respect the need for a work-life balance, with this behind the focus of many HR related studies. Most studies reveal millennials especially consider work life balance as one of the most important factors when choosing a prospective employer.
However, the policy holds major appeal across other generations too. Who wouldn’t be interested in unlimited time off? It is estimated less than 1% of companies offer this policy, so it’s certainly a perk which will grab the attention of all types of workers.

Unlimited holidays promotes trust and employee engagement

With an unlimited holiday/paid-time-off policy, employees must be fully responsible for their own working schedule. They need to evaluate their workload and decide the amount of time off their work schedule can handle—rather than being dictated to a standard allowance.

The trust and flexibility this promotes can mean the workforce is more engaged overall. In fact, LinkedIn has adopted its own ‘unlimited vacation policy’ (also known as a ‘discretionary time off’ (DTO) model) in order to improve employee engagement. Chief HR Officer of LinkedIn, Pat Wadors, explained: “We believe DTO will give our employees the ability to better meet their personal needs, which will then allow them to bring their best self to work,” she says. “We are not alone in making this shift to DTO. It’s part of a growing movement to place more focus on results and empowerment, not hours worked.”

Another key factor is the concept of ‘recharging’. Statistically, those employees who take more holidays enjoy bigger success, reduced stress, and more happiness at work as well as at home.

Offering unlimited holidays could also improve employer’s profits

With traditional paid-time-off systems (PTO), workers accumulate holiday time. If they then leave the company, those holiday hours are converted into a financial amount that must be paid by law as deferred compensation, if they’re unused. In larger companies, this can add up very quickly. With an unlimited vacation policy, employers have nothing to pay when it comes to accrued holiday time at the end of a person’s employment.

Another benefit to unlimited holidays is that it means one less job for the HR department. This is due to avoiding the need to track employee holiday time which reduces HR administrative tasks.

But there are also negative sides to adopting an unlimited holiday policy…

Due to their fluid structure, unlimited holiday policies can be difficult to organize and manage

Employers need to set certain parameters in regards to how much time off is actually appropriate for their workplace. Even though the policy is “unlimited,” an employee’s ability to take time off will be directly linked to their workload, department, and manager.

Each manager’s preferences will be very different. There may be a time where a manager approves one employee’s request for holidays, but not another’s. One manager may love the concept and encourage their team to take full advantage of it, whilst their colleagues may feel and do the complete opposite.

For certain businesses there are structural limitations standing in the way

Companies who are full of unionized workers or non-exempt employees, whose hours must be tracked, may find unlimited vacation policies difficult to manage. The same is true of job roles which call for employees to be on-site, like manufacturing, catering, and other service roles.

Transitioning from a traditional holiday policy to an unlimited one can be hard

It’s very important that if a business is looking to adopt an unlimited holidays policy, first they must make sure that employees are compensated for any unused holiday time under their old system.

Another thing that needs to be considered is the employees themselves. There is the possibility that employees may reject the new policy. They could be overwhelmed by the lack of structure that comes with the policy or suspicious of the motives. It could also cause some friction between colleagues as some will take more holidays than others.

Overall, an unlimited holiday policy offers many potential benefits for employees and employers alike. If a clear communication and transition plan is in place, an unlimited policy can mean the best talent is recruited, current employees feel empowered and bottom lines could be improved. However, it may not be a policy which fits well with every business.

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