Benefits of offering unlimited paid holiday

According to research by Small Business Prices, additional holiday is currently a popular perk for employees, with 26.28% claiming they would value this over a pay rise. Offering additional holiday as part of an unlimited paid holiday package will make you more competitive to prospective employees during the hiring process. Some studies suggest that unlimited paid holiday may correlate with higher productivity and fewer sick days; one recruiter study reported employees taking 50% fewer sick days under such schemes. Offering unlimited vacation also creates a new relationship of trust between the employer and the employee, where the employee has the independence to choose when to take time off on the grounds that they complete their work. You can adapt to the changing nature of what is required from employees in modern work cultures; some research has indicated that a ‘results-first’ culture with improved work-life balance may be associated with a 10% drop in staff turnover Research by Indeed showed that 9 out of 10 employees considered work-life balance more important than salary, with Transport for London (TfL) and the University of Leeds in particular offering a great degree of flexibility.

Potential cons of offering paid unlimited leave

One of the main pitfalls of offering paid unlimited leave to your staff is a psychological one; if your employees are conscientious, which is usually a useful trait, then you might find that they take fewer days as holiday. After HR software company CharlieHR implemented a paid unlimited leave policy for three years, they found that staff took fewer days as holiday; their highly motivated staff felt anxiety about when to take time off responsibly with looming deadlines and the prospect of handovers. Since ending the scheme, CharlieHR have decided that having a set number of days instead of unlimited days has a positive counterintuitive effect on staff. When they are given a set number of days of holiday pay, they feel as if they are theirs to take: “It’s some kind of psychological quirk of ownership – when something belongs to you, then you immediately value it far more highly.” Another issue that CharlieHR found was that staff members differ in their conscientiousness, and so one particularly conscientious member of staff may end up “picking up the slack” while other staff members decide they should have more time off. This is particularly damaging to workplace relationships and team cohesion, if there are deadlines and a team needs to pull together during a project or campaign, or when there is a specialist issue that needs urgent troubleshooting.

Considerations for implementing a policy

In the UK, employees are entitled to minimum statutory holiday under the Working Time Regulations. Employers should ensure their policies allow employees to take at least this minimum each year. An unlimited paid holiday policy can sit alongside statutory holiday entitlements. UK law provides employees with 5.6 weeks of paid statutory holiday per year, which must remain available within any policy structure. If you are a UK business, it is important that you make this clear to your employee, even if you are planning on introducing unlimited vacations to their package. Such as in the previous example of unlimited holiday cons, you might find that your respective team members have different ideas about how much time off they should be entitled to, which is dependent on their conscientiousness about their role in the team. 

Considerations when developing an unlimited holiday policy in the UK

In the UK, creating a hybrid policy which includes minimum statutory holiday entitlement and unlimited paid holiday should be your goal, so that you do not breach UK employment law. With the pros and cons of unlimited holiday pay in mind, you will want to create a policy that is clear and benefits both your team as well as your employees as individuals. These are examples of considerations employers often include:

• Any criteria for reviewing holiday requests (e.g., workload, project timelines).
• Whether there are guidelines on consecutive days off, consistent with statutory entitlements.
• A clear distinction between statutory holiday entitlement and any additional paid time off.
• How managers will assess workloads, scheduling, and communication around leave.

Ultimately, you will want to make sure that you balance a progressive work culture with healthy relationships between staff. Therefore, it is best to only implement unlimited vacations if you think it would be of benefit to your workplace.