Do You Want Unlimited Vacation Days at Your Job?

Welcome to my new blog which will be investigating and analyzing financial topics that are relevant in today’s business world. Whether you work in finance, accounting or running your own business, this blog may be helpful in keeping abreast of and understanding key issues that businesses face.

The topic I am interested in today is company Unlimited Vacation policies. This small but growing trend in start-ups and small businesses is providing a new way to think about vacation policies.

We all know the traditional types of vacation policies we usually come in contact with in the workplace i.e. accruing a bank of vacation hours each year that employees can redeem, accruing fractions of vacation hours with each actual hour worked, or just receiving a set number of days off each year. These policies are also sometimes combined with sick time, personal time, etc.

The concept of unlimited vacation gets rid of the administrative aspect of enforcing and auditing a traditional vacation policy and instead the company trusts the employee to 1) not abuse the policy and 2) make sure taking vacation days does not reduce the effectiveness of his/her job.  With an unlimited vacation policy, employees take as much vacation time as they need as long as their work does not suffer.  This new trend centers around the idea of treating employees as “responsible, trustworthy adults” as mentioned in the money.CNN.com article “Unlimited vacation.  It may not be as cool as it sounds.”  How would your employees handle an open ended policy like this? Would they rise to the occasion of being treated with a higher degree of respect? Or would they look for ways to abuse the system?

According to the Forbes.com article “Could Unlimited Vacation Time Work For Your Company?” Only 3% of businesses in the United States are employing an unlimited vacation policy.  Of these 3% there seems to be mixed reviews.  According to qz.com’s article “How to have a successful unlimited vacation policy” Tribune Publishing rescinded its unlimited vacation policy within a week because of employee complaints.  Other companies such as Netflix, Groupon and The Virgin Group (founded by Richard Branson) are executing successful unlimited vacation policies.

One aspect of an unlimited vacation policy that a company should consider is how your employees would interpret this change.  Would they see it as a signal that taking vacation is frowned upon?  Studies have shown that on average Americans take approximately half of the vacation due to them.  Would they take even less as a result of a policy like this?  Or would your employees go the other way and take as many vacation days as possible therefore rendering the policy a failure?

In considering a move to unlimited vacation it will be important to consider 1) what type of workforce you employ, for example, mostly non-exempt employees that must be covered any time they are not physically on the job (may not work for an unlimited vacation policy) or mostly exempt employees that can be productive from home or anywhere else (even vacation??) and 2)  how your workforce would  perceive such a policy.  Company vacation policies exist so that employees have the freedom to do what they want/need to do outside of work.  If an employer has a workforce with the right fit for flexible vacation and the policy was well executed with employees understanding that the company supports routinely taking vacation, then maybe that 3% statistic will grow in the future.