Small-to-medium-sized businesses are only beginning to realize the benefits of offering employees unlimited vacation days. 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 time-off 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 vacation 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 vacation days per year.
It’s important to note that such policies are designed to cover much more than just vacation 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 time-off days, they also allow them to decide just how they’ll spend that time.
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 impacts employee engagement. Giving workers more autonomy allows for better physical and mental health, closer relationships, increased productivity, and new and fresh perspectives. A 2012 study conducted by U.C Irvine and the U.S. Army showed that employees who are cut off from work emails are less stressed and can focus better. Meanwhile, a 2011 Harvard study estimated that sleep deprivation costs American companies $63.2 billion a year in lost productivity.
There are other benefits for companies that offer an unlimited time-off policy:
- It can save money. Because companies are no longer obligated to pay employees for a set number of vacation 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 vacation policy is an asset for companies that want to recruit a top-notch workforce. And, since 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 time off policy is implemented well, it should not reduce productivity and may even increase it. In fact, a year after Indeed rolled out its unlimited time off policy—during which time employee vacation days increased by 20 percent—the company was still able to significantly increase headcount, open new offices, and boost monthly visitors to its website.
Convincing Employees to Take Unlimited Vacation Days
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 place a high value on employee happiness and engagement.
And so, however counterintuitive 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 percent of employees said they do work-related business while on vacation, and 20 percent took no summer vacation. According to a 2014 Oxford Economics study, Americans on average failed to use 3.2 vacation days, totaling 429 million unused days.
Preventing Abuse and Keeping Up Productivity
Offering an unlimited time-off 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 some things employers thinking about incorporating an unlimited PTO policy should keep in mind:
- The company culture must be employee-focused. The shift from a traditional vacation 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 vacation doesn’t mean unplanned vacation. Supervisors and HR must have open lines of communication with employees to ensure that vacations are requested with ample lead time. As with a traditional policy, vacations must be appropriately staggered and scheduled so 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 “paralyzed” 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 vacations 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 vacation 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.
- How to Create a Paid Time Off Policy
- Unlimited PTO Makes Life Better for Employees and Improves Productivity
- 10 Recruiting Strategies for Hiring Great Employees
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