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Unlimited Vacation Policy: Why Employers Should Consider It

Small-to-medium-sized businesses are only beginning to realise the benefits of offering employees unlimited holidays. In a nutshell, companies that make a meaningful effort to help employees unplug and recharge – and to feel trusted to decide when they need to take time off – can see improved employee engagement and possibly even increased productivity. Still, HR has to be smart in how it offers an unlimited holiday policy.

According to research conducted by Indeed, the most important contributing factor to job happiness is employees’ ability to find harmony between the demands of work and their personal lives. This desire for work-life balance resonates with workers, regardless of age or location.

Under an unlimited holiday policy, employees may take off as much time as they wish, as long as they are still able to perform their functions normally and company business isn’t disrupted. It’s a dramatically different approach compared to traditional policies that result in the average American worker taking about 12 holiday days per year.

It’s important to note that such policies are designed to cover much more than just holiday time. Think of them more as allowing for time spent doing, well, just about anything that isn’t work. That can mean visiting a sick relative, attending a child’s championship volleyball game, volunteering, taking time off for bereavement or just staying at home and catching up on sleep. So, in addition to companies looking to employees to determine the number of holiday days, they also allow them to decide just how they’ll spend that time.

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The benefits of unlimited time off

It makes sense that companies have a lot to gain by implementing such a policy when you consider how it affects employee engagement. Giving workers more autonomy allows for better physical and mental health, closer relationships, increased productivity and new and fresh perspectives. There are other benefits for companies that offer an unlimited holiday policy:

  • It can save money. Because companies are no longer obliged to pay employees for a set number of holidays days, there’s no need to pay them for unused days at the end of the year or when an employee leaves the company.
  • It’s less of a headache for HR. Given that employees can take paid time off for any reason, HR is not saddled with tracking the purpose of each request for time off. HR only has to be sure to have a reliable system for managers to approve such requests.
  • It’s good for recruitment. Because employees highly value the benefit of unlimited time off, having an unlimited holiday policy is an asset for companies that want to recruit a top-notch workforce. And, as there is only a small percentage of companies that offer such a policy, those that do have a recruitment edge.
  • It can increase productivity. When an unlimited holiday policy is implemented well, it should not reduce productivity and may even increase it. In fact, a year after Indeed rolled out its unlimited holiday policy – during which time employee holiday days increased by 20 per cent – the company was still able to significantly increase headcount, open new offices and boost monthly visitors to its website.

Convincing employees to take unlimited holidays

As more employers embrace the idea that productivity doesn’t just come from hard work but from a balance of work and time off from work, they’re looking at not only implementing new policies but also fostering a shift in their company culture – to one that places a high value on employee happiness and engagement.

And so, however counter-intuitive it might feel, companies that want to boost employee engagement should encourage workers to take time off. But while convincing employees to work less might seem like an easy task, in reality, many are reluctant to unplug. A recent Indeed survey of 2,000 full-time employed adults in the US and found that 59 per cent of employees said they do work-related business while on holiday, and 20 per cent took no summer holiday.

Preventing abuse and keeping up productivity

Offering an unlimited holiday policy is not for every company. It takes resources and a commitment to make it work for employees who wish to access it. Employers looking to implement such a policy must evaluate whether they’re ready for such a move.

Here are some things that employers thinking about incorporating an unlimited PTO policy should bear in mind:

  • The company culture must be employee focused. The shift from a traditional holiday plan to one that is open and unlimited has to be supported by a culture that is trusting and values employee autonomy. If morale is low, employees are more likely to abuse the system.
  • There should be good manager-employee communication. Unlimited holiday doesn’t mean unplanned holiday. Supervisors and HR must have open lines of communication with employees to ensure that holidays are requested with ample lead time. As with a traditional policy, holidays must be appropriately staggered and scheduled so that they don’t hamper productivity.
  • Encourage employees to take time off. Many employees feel guilty about asking for time away from work. Some can become “paralysed” at the prospect of having so much choice. If employees haven’t taken time off in a while, managers should ask how they are doing and whether a break would be beneficial.
  • Lead by example. Senior staff need time off just as much as subordinates and can help to encourage employees to take holidays by doing just that. Once employees see that business still hums along even when managers are out for a while, they’ll be more inclined to do the same.
  • Talk about the issue frequently. Executives and managers should educate employees about the company’s holiday policy and its benefits. Managers should help workers understand that the purpose is to support them in maintaining a healthy, work-life balance, and that they trust them to decide how much time off is necessary to stay productive while investing in self-care.

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