I am frequently asked about the pros and cons of having an unlimited vacation policy. To begin, I do not think it works for every category of worker, nor does it work for every type of company. When it does work, it usually is applied only to executive or professional types of workers, and only then in an atmosphere where such workers are employed in situations where co-workers or clients depend on consistent performance, such that there is always pressure to perform and deliver services in a timely fashion. Workers who work autonomously for extended periods of time may not be as incentivized to complete projects in a timely manner and may be more difficult to monitor, and therefore, absent a very high level of trust, an unlimited vacation policy for such persons may lead to abuse.
On the plus side, unlimited policies are generally perceived as a positive benefit for employees, and therefore can serve to improve morale. Management can support this perception by making sure to establish the unlimited policy with a message that the company believes that it is very important for these workers to have a good work-life balance. The fact that unlimited vacation policies are still somewhat rare will also serve to create the impression that the employer is offering a rather unique opportunity.
Viewed in this light, an unlimited vacation policy can also be a useful recruiting tool. Generational studies show that workers under 40 years of age tend to care more about benefits than pay, and are very concerned about achieving an acceptable work-life balance. An unlimited vacation policy is just the type of benefit that these persons desire when selecting an employer.
Another plus is that, if employees are properly motivated and monitored in terms of achieving work goals, unlimited policies tend to save money for California employers. Studies have shown that workers under unlimited policies do not take any more time off than those under traditional limited paid time off policies, and may use less. More importantly, unlike vacation accrued under standard accrual policies, vacation does not accrue under an unlimited policy and therefore need not be paid out on termination of employment.
Of course, the downside of an unlimited policy is the possibility of abuse. Even in situations where people do not work autonomously, there must be a substantial level of trust to implement an unlimited policy. An employer can reduce the risk of abuse in the drafting of an unlimited vacation policy. For example, prohibiting the use of vacation time for paid sick leave purposes will serve to prohibit the use of unlimited time for an extended absence caused by illness, disability or other medical condition. In addition, an employer should consider establishing a cap on the use of vacation at any one time.
A lesser known downside is the possibility of employee burnout. An unlimited vacation policy can create an atmosphere where employees take less time off, and may even compete at some level on this basis. In such cases, management must appropriately encourage reticent employees to take the time off that they need.
I have also heard that some more senior employees dislike the fact that more junior workers enjoy the same unlimited time off, which they feel is inappropriate as they have earned something greater through their seniority. I would think, however, that in such cases an employer could point to other perks enjoyed by those with seniority, such as higher salaries, expense budgets, car allowance, etc., as remaining examples of the rewards they have earned.
In sum, I believe an unlimited policy can work well and be beneficial for both the employer and the employees when implemented appropriately and when provided to only professionals or executive-level workers.
