Policy

What An Unlimited Vacation Policy Really Means

By on November 26, 2015

unlimited vacation policy

VACATION: the number of days or hours per year for which an employer agrees to pay workers while they are not working

We must begin there, because that’s the vacation we’re really talking about.

So I’m asking you to purge whatever feelings you’ve ascribed to “vacation.” You know that endless beach that appears in your mind’s eye? Turn it upside down and shake it like you would an Etch a Sketch. And that genuine feeling of serenity washing over you? Breathe it on out.

The idea of an unlimited vacation is one that takes the visions and feelings we’ve built up around vacations [cue Clark Griswold in National Lampoon’s Vacation]:

…and knows what our first instinct will be… Yes, please!

But its name is one part “endless buffet” and one part PATRIOT ACT. You know how the former typically goes; you pay more because your stomach is growling and your first instinct causes you to believe that endless eating sounds… Yes, please!  But then you eat what you usually eat, you’re stuffed, and that’s enough. You just paid 30% more to eat 0% more. And the latter is the kind of political poetics that applies the pressure of language to influence your decision: What do you mean you’re against the PATRIOT ACT? What kind of American are you?

What do you mean you’re against an unlimited vacation? What kind of employee are you?

Consider This: Our modern idea of vacation—as a period of time away from work that emphasizes the virtue of leisure—has its roots in the middle of the 19th century, when people began to believe that businessmen were suffering from “brain fatigue.” See NPR’s The History Of The Vacation Examined at the end of this article.

Unlimited vacation isn’t policy, it’s a workplace culture flag

It goes by a variety of names—unlimited PTO, flexible vacation, and permissive time off, among others—but from a policy standpoint it doesn’t carry the same across-the-board standards as something like “6-weeks paid vacation.” When I put out a request on HARO to get opinions for this piece, I actually had two employees at the same company (which has an unlimited vacation policy) offer different definitions of what it meant to them.

This brought me to the conclusion that unlimited vacation doesn’t mean anything, until it does. If a company embraces it, they are not embracing an agreed upon policy so much as they are waving their workplace culture flag. Companies touting their unlimited vacation policy are telling employees: We’re a progressive company to work for. Join us. 

Here are a few tenets this flag has come to stand for:

  • employees know how much time off they require in order to maintain productivity
  • vacation time should not be dictated by seniority or other standards of hierarchy
  • time off work is rejuvenating and therefore leads to happier employees
  • the company values what you get done, not how long you’ve been clocked in

While such companies typically are progressive (they allow employees to work remotely either part or full-time, they pay fair wages, etc.), Megan McArdle, a columnist at Bloomberg View, offers this perspective:

“But how much of a perk is this, really? There’s a reason that you tend to see this perk at places like Netflix, rather than places like Wal-Mart: they’re staffed with workaholics who probably don’t take much of their vacation anyway.”

McArdle backs this point up with what she refers to as “superjobs,” those kinds of jobs offered by companies (like Netflix) that tend to provide a host of other intangible benefits. But, a “superjob” requires what I’ll call a “superworker,” and she offers this description for such employees:

“The people who do these jobs have a very high level of commitment to their work, partly because the people who do them tend to be hard-working, and partly because being a successful professional is such a deep part of their personal identity and ethos.”

While McArdle’s argument reeks of some kind of cultural bias—I’ve seen Wal-Mart employees who are every bit the workaholic, and whose identity and ethos are every bit as propelled by being a successful professional—I see where she’s headed. Teasing the thread further, it becomes clear that (similar to the endless buffet) there’s more to unlimited vacation than simply the magnificent altruism of the company offering it.

The financial upswing

Attracting great employees is certainly a financial benefit to the company, but the financial upswing for waving the unlimited vacation flag goes far deeper. For starters, there is the aforementioned “superjobs” culture whereby employees tend to take less time off anyways (Kickstarter got rid of its unlimited vacation policy because of this). However, a major benefit is that companies no longer have to pay out unused days. Jena McGregor over at The Washington Post put it this way:

“Under a traditional vacation policy, employees either accrue vacation time over the course of the year, or start off the year with a bank of days that are owed to them. If they leave the company before they have used up all the time they accrued, employees are typically paid out their unused time. Not so at companies with unlimited vacation policies—they no longer have to carry any liability on their books for what goes unused.”

What does that liability look in dollars and cents? In a report from Project: Time Off titled, The Hidden Costs of Unused Leave, Oxford Economics found that the average vacation liability per U.S. worker is about $1900. This means companies are strapped with 224 billion in vacation liabilities that they will have to pay out to employees when they retire or leave the company. However, the most startling statistic in the report is this: that vacation liability figure grew by 65 billion just in the last year.

In essence, modern employees (referred to in the report as “work martyrs” for their willingness to not use vacation days) under these traditional vacation policies are significantly costing the company by not taking their vacation days.

That’s not a bill companies will have to pay out anytime soon, but it’s so terrifying a prospect, according to the report, that it’s leading many U.S. companies to actively encourage (and even incentivize) employees to take their vacation. This can come in the form of switching to a “use it or lose it” policy where unused days do not accrue (which is what about 25% of U.S. companies already do). Or, I’d argue, it can cause companies to abandon the increasingly expensive status quo and join the cool kids by pivoting toward some form of unlimited vacation.

When it works, and why

John Rampton, Founder and CEO of Due.com, told me that his employees love their unlimited vacation policy. And he does, too. He’s had a 40% drop in employees leaving his team since offering the policy. The policy isn’t just a flag for John and his team, it’s actually become a policy that’s working:

“We’ve found that employees do take advantage of this and on average spend 21 days of vacation each year. Though they take more vacation days, on average they check their emails 3x a day in comparison to the 1x a day we had while we had a 2 week policy.”

While critics of unlimited vacation would likely circle as hawks around that “3x a day” comment, as someone who has worked remotely for over 6 years I see it as a positive. While going unplugged and away from work is certainly important, I’ve also found value in the middle way—those occasional days of checking email but not being (or feeling pressured to be) either fully connected or disconnected from work.

In an article for Fast Company titled, We Offered Unlimited Vacation For One Year. Here’s What We Learned., Nathan Christensen, CEO of Mammoth, shared a story similar to Rampton’s. While his team took roughly the same amount of vacation time (21 days) as when they had a more traditional policy, after one year his employees ranked the unlimited vacation policy just below health insurance and their 401(k) in terms of employee benefits (beating out vision/dental insurance, and support for professional development). In trying to uncover why, Christensen said:

“The answer may be that unlimited vacation is at least as valuable for what it says as for what it does.”

From there, he posits “three hidden messages of unlimited vacation.” And all three have little to do with actual policy, and a whole lot to do with the workplace culture:

1. “…offering unlimited vacation communicates that a company views its staff holistically.”

2. “…unlimited vacation policies convey trust.”

3. “…unlimited vacation treats employees as individuals.”

I heard this “it works” mantra from countless other professionals and from a variety of different angles.

For Christopher Searles and his team at Searles Media, an unlimited vacation policy, “eliminates the stress and the overhead on both the company and the employee’s part in tracking exactly how much time has been accrued and taken.”

For Danielle Thompson and her team at ConsumerAffairs, an unlimited vacation policy “alleviates any fear generally associated with calling in sick or taking a vacation in a time period that would be considered probationary by most companies” while it “allows for employees to self regulate and show their company they are prudent time managers who take a highly organized approach to achieving their business goals.”

Unlimited vacation is here, and here to stay

For important reasons both financial and cultural, what we’re now referring to as “unlimited vacation” is here to stay. It may take on a name that better reflects what it actually is, but with companies increasingly feeling the burden of employees who won’t take their vacation days, and employees increasingly wanting to work for progressive companies who view them holistically—the concept is just getting started.

For those who still prefer their 6-week vacation over what’s to come, it’s time to turn that preference upside down and shake it clean.

Do you like the direction vacation policies are headed? Is there a facet to the unlimited vacation conversation that wasn’t covered here? Let us know in the comment section.

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About the featured photo:

Steve Barton’s “Living in Paradise” is our feature painting this week. He is a world renowned artist known for his distinct loose impressionistic style. For decades Steve has been painting works from tropical scenes to still life and has been noted for his ability to capture his subjects in a distinct way through color and technique. For more information, check out Barton Studios.

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  • Eric Wall

    Great article. I think the takeaway here is that unlimited vacation has significance only in the context of the organization as a whole.
    If unlimited vacation is offered along with other benefits and policies that demonstrate trust in employees’ ability to exercise discretion over when and how to reach goals, it is evidence of a progressive organization. These benefits can include telecommuting and flextime. These organizations also measure success by something other than the number of hours an employee puts in or how late they stay at the office. If
    a business implements an unlimited vacation policy in isolation, it is more likely to be a cost saving measure and, in practice, employees won’t find themselves getting more time off. Great insights on a timely issue!

    • Thanks for the props, Eric. That’s certainly one takeaway I found in my research, and is what I tried to say in “unlimited vacation doesn’t mean anything, until it does.” It’s the context/culture that makes it or breaks it. Great insight about the cost saving measure. You nailed that one.

  • Frederick Wright

    Really good article – very true that a company’s vacation policy is one of their strongest tells. Providing deep insight to how they view employees. As their greatest resource, or as slaves only grudgingly remunerated. I don’t necessarily agree that every company that offers super-benefits will automatically expect ‘super-workers’, although that obviously happens. My previous company was a Boston-based startup, with an intensely diverse cultural environment. Long, often contiguous, vacations were standard policy because half the staff needed to see families back in India, China, or Russia. My current company is an investment bank which takes some measure of delight in doing the opposite of our competitors – generous vacation policy with strong incentives to encourage managers to balance workloads in such a way that very little vacation time is ever carried over. Unlimited sick time so that no one needs to come to work with the sniffles or a cough and thus infect others. Unlimited child care for all children of employees. A 35 hour work week, strictly enforced, no overtime without immediate corresponding comp time. Sharp limits on after-work socialising so your private life rarely bleeds into your work life. Etc, etc.

    • Frederick – thanks so much for sharing your experiences here. They certainly help to show a fuller picture than I could do alone (and this is why we love good comments here at TMT). You actually bring up several topics that are worth their own articles. I’ll give you a shout out if we end up rolling with them. Thanks again for the read, share and comment.

  • Hanna Hasl-Kelchner

    Nicely done! You do a masterful job of explaining why the concept of unlimited vacation is here to stay. You also point out the pivotal roll trust plays in unlocking the true benefit of this philosophy. Trust is critical because management needs to trust employees not to abuse the policy and employees need to trust management not to retaliate when taking more time off than the boss or assign workloads that make getting away impossible. What I find troubling is the reference to companies who have that policy and find employees checking their e-mail 3 times a day when they’re on vacation. It begs the question: what is a vacation? Is it time away from the office to attend to day-to-day personal matters? Meeting the heating repair guy? Chaperoning the kids field trip? Taking a family member to an out-patient medical procedure? Or is it time away from the office to climb the Great Wall of China, float down the canals of Venice, scuba dive the great barrier reef in Australia? Or is it all of the above?
    In my experience, to avoid burn out, you need to periodically unplug from the office to recharge. If you’re compelled to check in, you’re really working remotely on a reduced schedule.
    As pointed out in your reply to Mr Wall’s comment, the context/culture makes it or breaks it.

    • Wow. Thank you, Hanna! I’m stuck on that 3x a day comment as well, precisely for the reason you pointed out. It has made me re-think what I previously believed a vacation to be — total detachment. Also, I completely agree regarding the “working remotely on a reduced schedule” line. It seems to me that the type of job matters as well, right? When I worked in a produce department, any time off was actually time off. I wasn’t thinking about work and I couldn’t stack apples. But in a variety of other fields, including those demanding creativity, time away from work can be what sparks new ideas, and an employee “checking back in” may be a way to lasso the muse before the idea is lost. There are many variables to address, but that seems the better route than pretending they don’t exist and trying to mask them with rigid structures. Grateful for your comment, Hanna!

  • EB

    A great article, and yes, “unlimited” can mean many things based on the org. Not always a good thing. I’m a fan of the unlimited paired with a policy that requires employees take a certain number of days off. I feel like that’s where it will end up as too many companies have unlimited policies but don’t really mean it. By requiring employees take a certain number of days off minimum, it makes employees feel they actually can take time off without worry of their job when they get back.

    • Thanks for your note here, EB. I received many responses via email, LinkedIn and seemingly everywhere except this comment section that echo the point you made. It seems this hybrid model of unlimited vacation has potential to at once wave the culture flag while also having some practical policy behind it (“mean it,” as you said).

      • EB

        Agreed. I work in staffing and am always surprised to hear crazy stories about these types of policies. A friend of mine recently got a position in an “unlimited” vacation environment, however, HR was very clear that your work needs to still get done while on vacation. On top of that, they have “guidelines” based on how much vacation you can take based on how many years. First year gets max two weeks paid vacation AND unlimited vacation. Crazy but true. That’s a case of an unlimited vacation policy to try to attract great candidates only to turn around and show them you don’t trust them. And this is at a multi-billion dollar company. Also, many studies I’ve read show that people actually take less time off when there’s an unlimited policy – to me this policy is usually not a generous one but a way for a company to get more work out of their employees under the guise of generosity. A well-researched article none the less, kudos. I look forward to reading more of your work.

  • Jason Cavness

    As mentioned in the article, this will not work for all companies. It will also be dependent upon your position within your company. For me the companies giving unlimited PTO might be telling their employees that we will allow you to go on vacation as often as you require. But they are also telling their employees that you are also on call for us 365 24/7. So an employee can take his PTO, but that project that is due will still have to be finished on time and on budget. Although, this is great for the culture of companies, as mentioned in the article, companies have a very good financial incentive to provide unlimited PTO. The money being saved by these companies is significant. I do believe that companies with this policy are showing a level of trust in their employees that will motivate their employees to perform at a higher level.

    • Hi Jason – I’m glad you brought this up here. While I don’t agree that all companies have that hidden meaning of “you are also on call 365 24/7, I see your point. On a side note: I heard from several people at lean startups who said they’d love to offer unlimited vacation, but can barely make any form of vacation work simply because there’s nobody to fill in when an employee takes off for a week. It certainly seems a stable foundation must be in place (one backed by trust, as you said) before this can take root.

  • Ben Kinnard

    I wonder also if unlimited vacation led to a decline in the number of “sickies” being pulled by employees (or at least a reduction in the total number of sick days).
    When you have a finite number of days then you want to use up every single one before they expire (it becomes you vs. the company, getting what you are “owed” etc.), but with unlimited vacation you are more likely to be thinking from the same side

    • Ben – GREAT point here. I spoke more from the cultural standpoint, but love this idea that unlimited vacation can actually change the mindset from “you vs them” to “us.” I’ll need to think more on that. Thanks for sharing!

  • Riann Umaga-Marshall

    Great article. Definitely food for thought.

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