Unlimited Leave Policy: Is it Viable and Worth the Shift?

Unlimited leave policies can often conjure up images of workers relaxing on an island whilst a quiet office sits with empty chairs. However, the reality has been proven to be different. Instead, companies from Netflix to Evernote have successfully implemented unlimited vacation policies (more on this later) and found their staff to be as productive as ever, if not more.

Nevertheless, just because it works for Netflix, does that mean it would be successful for you? Afterall, if 55% of American workers currently don’t use all of their paid time off each year, maybe it’s not worth shuffling your existing policy to offer even more leave.

In the next few minutes, we’ll walk you through the unlimited leave policy, the pros and cons, how to assess whether it’s right for your company, and tips for making an open vacation policy as successful as possible.

Let’s start from the beginning.

What is an unlimited leave policy?

An unlimited leave policy allows employees to decide for themselves how much paid leave they take providing this leave doesn’t interfere with their overall productivity. This leave policy can be used to cover vacation, sick leave, and special leave scenarios. 

The leave policy is typically an agreement between employers and employees; companies won’t provide a set rule on the number of days employees can take off, as long as workers communicate leave details with their manager in advance, as well as ensure they maintain all of their work responsibilities.

Compare this to a limited leave policy—which is when companies offer a fixed number of vacation and sick days, specified in the employee’s contract. Typically, employees accumulate these set days over time and have a deadline by which to use them.

Now that we’ve gone over the difference between unlimited leave and limited leave policies, it’s helpful to examine the unlimited policy from multiple angles before deciding whether to adopt it for your company.

Is it worth it to introduce unlimited leave?

Unlimited leave has several benefits, making it a smart policy and an attractive recruitment tool for businesses. From well-rested, productive workers to drawing in more talent, here’s how  it can help you:

The Pros

1. An unlimited leave policy can make employees more productive
   Employees with more flexible schedules can get more done, not less. 43% of respondents said that flexible working hours helped them achieve more productivity, according to the 2021 Digital Worker Experience Survey by Gartner.
2. Unlimited  annual leave can empower employees
   When employees can move their schedules around to suit their needs, it could not only empower them to get more done, but also foster trust between managers and team members. When companies can gain their trust, employees may feel more engaged and loyal towards your brand.
3. Unlimited time off could mean happier employees
   Unlimited time off can create a stronger work-life balance, which allows employees to take time for themselves and not feel guilty about it. This leniency can reduce burnout, leading to happier, more productive team members.
4. An open vacation policy helps companies stand out
   Companies frequently look for ways to stand out in competitive markets, such as experimenting with a four-day work week. Benefits such as an open vacation policy can help you land top talent and give you an edge over the competition. In fact, workers cited increased benefits such as unlimited PTO as a reason for starting a new job.

We’ve discussed a few benefits of unlimited leave. Let’s examine the other side and discuss a few reasons why some businesses may find it challenging to implement an open vacation policy.

The cons

1. An open vacation policy may cause unbalanced schedules
   If some team members feel comfortable taking 30 days off and others feel that they can’t take more than two weeks off, it will create an unbalanced atmosphere at work, which could cause tension between team members.
2. Unlimited  annual leave could leave companies understaffed
   For the companies that have certain busy seasons—for certain retail companies that may be late November through December— unlimited leave isn’t practical. If all employees take vacations during the busy season, you could lose customers due to a poor customer experience.
3. An unlimited leave policy could impact performance
   Only 21% of surveyed employees believe unlimited annual leave has a positive impact on their team’s performance, according to a study by Justworks. Unlimited leave policies often work best when employees agree to take time off with the caveat of knowing that when they are in the office, they get everything done and meet their goals.
   This type of strategy may not work for every employee, especially if your team members require a little more structure to motivate them to do their best work.
4. Unlimited vacation policies limit important employee data
   Unlimited leave makes it harder for businesses to track attendance and performance data—especially when everyone is on their own schedule and works different hours. This data is important for companies to assess whether they need to rethink certain processes or fix any underlying issues that impede production.
5. Unlimited leave is hard to manage
   With unlimited leave, you need to meet all of the legal requirements necessary for statutory leave entitlement. This could turn into a long process that detracts from other important work within the company.

If you’re considering an unlimited leave policy, here’s what to note 

One of the main considerations to take when opting for an unlimited annual leave policy is figuring out whether it will work for your team and whether you have the tools to successfully apply it. Here’s what else you may want to consider:

• Your company culture: Unlimited leave isn’t just an employee benefit, it’s also something that can greatly impact the company culture. Consider your culture as is—will employees embrace more flexibility, while also remaining committed to their responsibilities, or will it create an unproductive working environment?
• Guidelines for taking unlimited leave: Choosing unlimited holidays still means you need to manage the time that your employees spend away from the workplace. That way the company can make sure all employees are getting the time off they are entitled to by law. Therefore you need clear guidelines so employees understand what’s expected of them and you can ensure work gets done. These guidelines can include notifying the manager two weeks in advance, avoiding certain busy timeframes, and so on. 
• The potential for remote work: Some employees may want to take vacation for 10 days but work remotely for a few hours as well. A company with an open vacation policy may also want to address whether employees have the flexibility to decide where and how they work.
• Tools to help schedule or track productivity and leave: With unlimited leave, you need to track vacation days to ensure everything gets done. Whether you use a tool or a system, creating an easy way for employees to submit requests, notify managers, and include important information such as the dates they’ll be away could help you keep your operations running smoothly.
• Defining it in the employment contracts: You need to ensure the employment contracts include a minimum amount of holiday entitlement (not less than the statutory minimum annual leave entitlement) and additional wording to deal with any additional discretionary leave under the “unlimited leave” policy is recommended. Simply referring to leave entitlement as “unlimited” in employees’ contracts risks falling foul of employment legislation.

Smoothly transition to unlimited leave with the help of Papaya Global

An unlimited annual leave policy can be a powerful recruitment tool: 50% of workers in the U.S. would prefer access to unlimited PTO to earn a higher salary, according to a Harris poll survey for Fortune.

But there’s more to the policy than that. Between knowing and following local laws related to unlimited leave and understanding the potential pitfalls of the policy— there are several crucial considerations to take when managing a global workforce.

Papaya Global can empower you to make smarter decisions regarding hiring, onboarding, managing, and paying employees in 160+ countries, all while staying compliant with local laws and regulations. That means no matter which policy you choose—unlimited vacation or set days—Papaya’s solutions can help you manage your workforce in minutes, no matter where you or your employees reside.