The Endless Summer: Unlimited Vacation: Perk or Problem?

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george worlds collide.pngIf you're a Seinfeld junkie like me you'll remember the scene where George's worlds were colliding - "Independent George" was colliding with "Relationship George." The predicted result?  Relationship George will kill Independent George and everything will blow up!   I bet many of you are giggling now at that memory!  


Well, in the workplace, two very different worlds are also colliding.  In the traditional work world you do what you’re told, you keep your head down, you come to work every day, park in the right space, and you retire after 40 years with the company with a gold watch and a pension (that's a fully company paid retirement plan ...).  In the emerging work world, the who, what, how, when and where of work are all flexible and changing.  In this world, people work for multiple companies at a time, technology rules and the youth have most of the keys to that technology.  


doug test account pic.jpgIn the traditional work world companies “gave” employees a set number of paid sick days and vacation days to use each year.  Use it or lose it of course.  The longer you stayed at the company the more paid time off (PTO) you earned each year. Seniority clearly had its perks. The accounting for PTO was predictable as paid time off was capped each year.  Somewhere along the way some companies started letting employees carry-over unused PTO to the next year. 


And now, in the new networked world, some companies are actually offering their employees unlimited vacation time.  You heard me right, unlimited vacation…an endless summer.  A recent report from the Society of Human Resources Management found that 3% of companies were offering unlimited vacation and 6% of employers were offering unlimited paid time off days. 


At companies like Netflix, Evernote and Virgin America unlimited vacation policies have been lauded as the next great workplace perk.  No more tracking time off and paperwork.  Responsible employees unplug from work when they need to.  No rules.  No limits. At other companies the concept has backfired.  Take Tribune Publishing, which owns the Los Angeles Times, whose “discretionary time off” policy lasted one week after the staff rebelled.  Under their policy, employees would have no more set vacation, holiday or sick days and instead would work with their managers to determine their time off. 


I’m not a big fan of unlimited vacation.   Who doesn’t get suspicious when promised an unlimited amount of anything?  Buyer beware right?  In an unlimited vacation world, the boundaries are unknown.  How much time off is too much?  This uncertainty will confound even top employees.  And if all employees literally took a lot more time off, absent a corresponding improvement in productivity, less work gets done.  


For that reason, these unlimited policies do have limits.  At most of the companies that offer it, taking time off requires supervisory approval and your job productivity must not suffer.  For many employees it feels more like discretionary time off versus unlimited vacation. 


Unlimited policies could only work in a company where most employees are salaried, have control over their work, and are in jobs that productivity can be easily measured, which may be why most of the early adopters are in the high tech industry.   


Watch out for legal hurdles.  Also, absent a clearly defined policy, employers covered by the Family Medical Leave Act (FMLA) may find that they are on the hook to pay employees for those 12 weeks of leave. And in North Carolina, it’s not clear what would happen when an employee leaves / quits / gets fired.  Under NC law employers aren’t required to pay vacation, but if they do their policy must clearly address what happens to accrued vacation at employment’s end.  It’s not clear what amount is “accrued” under these unlimited policies.  One particular clause in NC law is concerning: “Ambiguous policies and practices shall be construed against the employer and in favor of employees.”  The intersection between these old, traditional laws and today's edgy, new practices is sometimes where the liability wrecks occur.  You could probably write an unlimited vacation policy which avoids accrual implications (and avoids discrimination / retaliation for using paid vacation), but it is not a no-brainer and needs a good legal review.


Focus On The Real Problem.  Frankly, I don’t believe unlimited vacation policies are needed.   A recent Glassdoor survey found that only 25% of Americans take all of their vacation time each year, even though they know how much time they are allowed to take.  This trend doesn’t serve the company any more than it serves the worker, since exhausted employees are less likely to be productive and committed to their work.   Combine that with the fact that we are always connected to work through our phones / tablets / phablets / laptops, and we have a very dangerous trend going on in the workplace.   That trend is the true problem that we need to address.  I would rather we work hard to help employees take real vacations where they are truly unplugged and disconnected from work and thus receive the intended psychological and physical benefits.  Some companies like Evernote actually withhold bonuses for employees that don’t take an entire week off during the year. 


Follow these steps to make sure you’re getting the most mileage out of your current vacation benefit.

  • Model the behavior you want. Employees look to managers to set the standard.  If managers don’t take time off or work during their vacations many employees will fall in line. 
  • Ensure your vacation policy and benefit falls in line with other companies in your area and industry.  One easy source for this data is CAI's Policies and Benefits Survey
  • Allow employees to carry over unused vacation only in exceptional situations.  I would allow employees to carry over sick / personal time (Call our Advice and Resolution team to discuss the pro's and con's of that strategy).
  • Make it clear that you want employees to totally unplug during vacation.  Don’t require and in fact discourage them from participating in meetings while gone. 


I don't believe unlimited vacation will fit at most companies.  Instead, take the time to make sure your employees are legitimately using your current vacation benefit.  They will thank you for it.


Call our Advice and Resolution team if you need help with your vacation or PTO policy.