What is an unlimited vacation policy?

As the name implies, an unlimited vacation policy allows employees to take off as much time as they wish. The caveat, of course, is that the employee must take time off for vacation in a way that allows them to perform their normal functions and complete all necessary projects without disruption to the company. 

Unlimited vacation time covers more than just actual vacations; it gives employees the chance to take off for just about anything that isn’t work-related. That can mean visiting a sick relative, volunteering, taking time off for bereavement or even just staying at home for a few days for some much-needed rest and relaxation. 

What are the benefits of an unlimited vacation policy? 

While it may seem counterintuitive to let employees take as much vacation as they want, it turns out that companies actually have a lot to gain by implementing such a policy. Giving workers more autonomy allows for better physical and mental health and increases productivity, and it makes employees feel more positive about their employer for respecting their time and their choices.

Here are some of the ways companies benefit from offering unlimited vacation:

• It can save money. Unlike traditional paid time off, an unlimited vacation policy usually doesn’t obligate companies to pay out unused vacation days to employees when they leave the company.
• It’s good for recruitment. Because employees highly value the benefit, having an unlimited vacation policy can help companies recruit top-notch talent. Although the practice is growing, currently, only a small number of companies offer unlimited vacation, so offering it gives your company a recruitment edge.
• It helps create work-life balance. According to research conducted by Indeed, the most important contributing factor to job happiness is an employee’s ability to find harmony between the demands of work and their personal life. This desire for work-life balance resonates with all workers, regardless of age, location or familial status. Having unlimited time off makes it easier to maintain that balance.
• It eliminates the December rush. With a traditional time-off policy, employees often lose vacation time if they don’t use it by the end of the year. This can result in lots of people requesting time off in December. Unlimited vacation time results in spreading out time off, so employees won’t all  be asking for time off at the same time.

How to create an unlimited vacation policy

Develop a detailed policy that outlines how the unlimited time off benefit works. Since many employees won’t be familiar with the relatively new concept of unlimited vacation, it’s important to have a cogent, thought-through policy in place that answers potential questions employees might have.  

Use these tips to develop your unlimited vacation policy: 

• Establish the request process. Outline the process employees need to follow to request time off, including how far in advance workers need to submit requests. Even though the time is unlimited, you will want to establish rules around what is appropriate regarding how far out vacation time needs to be requested. 
• Outline the approval process. Along with the request process, you need an approval process that determines whether an employee’s request to take time off should be granted if there’s a conflict. After all, unlimited time off doesn’t mean there are zero restrictions. For example, a request might be denied if someone else from the department is already off that day, making the department short-staffed if two people are out.
• Establish communication policies. Explain that employees should communicate with the team to let them know about their absences and that it’s the responsibility of absent employees to ensure there’s proper coverage of their usual duties during the time they’re gone.
• Discuss the length of each time-off request. You might limit how long each time-off period can last, such as 1-2 weeks, or you might have more stringent requirements for approval of anything over a week. This can help prevent abuse and ensure employees get their projects done with minimal disruption.
• Set minimum time off. Believe it or not, some employees take too little time off. That’s not healthy, so if this is a concern, set a minimum amount of time each employee has to take annually.
• Establish a process for investigating abuse. Describe the process you’ll take if you suspect someone is abusing the unlimited vacation policy, including the investigation process and consequences.
• Check for compliance. Time-off requirements vary by state. Review the applicable laws in your state when creating your policy. Have counsel review the policy before you implement it to ensure it doesn’t violate any state laws. 

Convincing employees to use vacation days

More employers are realizing that simply putting in longer hours doesn’t necessarily translate to higher productivity. Better outcomes result from a healthy balance of work and time off. Besides implementing new policies, employers should foster a shift in culture to one that places a high value on employee happiness and engagement.

Convincing employees to work fewer days might seem like an easy task, but many are reluctant to unplug. One Indeed survey of 2,000 full-time employed U.S. adults found that 59% of employees said they do work-related business while on vacation, and 20% didn’t take a summer vacation.

Ensure your employees understand your reasons for switching to unlimited vacation time. Let them know you want them to use vacation time, and ensure your managers send the same message. If managers complain about their employees taking time off, workers might be less likely to use vacation time in the future. 

Maintaining a healthy unlimited vacation policy

Employers should ensure that their company is ready before implementing an unlimited vacation policy, and they should understand how to maintain the policy. Here are some things to consider:

• 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. 
• There should be clear manager-employee communication. Unlimited vacation doesn’t mean unplanned vacation, and it doesn’t mean an employee can say, “See you later!” and take a 2-month vacation on a whim. 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 vacation policy, time off must be appropriately staggered and scheduled among the team members so that it doesn’t hamper productivity.
• Encourage employees to take time off. Many employees feel guilty about asking for time away from work. If employees haven’t taken time off in a while, managers should ask how they’re doing and whether a break would be beneficial.
• Lead by example. Senior staff members need time off just as much as subordinates. They can help encourage employees to take vacations by taking time off themselves. Once employees see that business still hums along even when managers are on a break, 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 help them maintain a healthy work-life balance and that they trust their employees to decide how much time off is necessary to stay productive while investing in self-care.

FAQs about unlimited vacation policies

What happens if someone takes advantage of unlimited time off?

One of the top things people think when first hearing “unlimited vacation” is that employees will abuse the system and constantly be out of the office. But a clearly defined unlimited vacation policy heads off almost any potential abuse if it outlines requirements for taking time off and what disciplinary action will be taken if abuse is suspected. 

Do you have to pay for vacation time when an employee leaves?

State laws vary when it comes to paying out unused vacation time when an employee leaves a company. Because departing employees with unlimited vacation time don’t accrue vacation time as they do with a traditional vacation policy, there’s often no requirement to pay out unused vacation days. Review state laws to understand your obligations.

How do you transition to unlimited vacation time?

You’ll need to determine with your HR department and, possibly, legal counsel how to handle the accrued time off that your employees have already earned when you switch. Your state might require that you pay for that time. You can pay employees for the accrued time when you start the unlimited plan, have employees use accrued time before you switch or pay it when the employee leaves the company. It may be a good idea to begin a new unlimited vacation policy at the beginning of the calendar year when employees’ vacation time generally resets.