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Unlimited Vacation Policies

Galia Aharoni Schmidt, Esq.

Unlimited vacation policies are on the rise and in demand. But are they as good as they sound? Here’s why I think unlimited vacation policies are bad for everyone involved.

They’re Not Actually Better for Employees

Most unlimited vacation plans are given with good intentions. Employers want to give a great benefit to their employees and encourage work/life balance.

Unfortunately, it’s been shown that employees who have unlimited vacation plans actually take LESS vacation, and they’re much more likely to work while they are out.

Traditional vacation policies also qualify as income earned, so when an employee leaves, they are entitled to get paid for any unused vacation. Unlimited vacation plans do not, so even if an employee hasn’t taken any vacation all year, they walk away with nothing.

From the employer side, these can be good things — less time off and no payout when they go! But if you really do want to do what’s best for the employee, unlimited vacation time isn’t it.

It Opens The Door to Discrimination Claims

The more wiggle room any employment policy has, the higher the risk of it being used in an unfair way, even accidentally. If there are no clear rules about how much vacation is okay, how to ask for it, and under what circumstances it will be granted, it’s far too easy to end up with a situation where the policy isn’t being doled out fairly, and you’re one complaint away from a discrimination claim.

It Doesn’t Avoid Admin

One purported pro of unlimited vacation is that employers no longer have to track things like accrual and days off. But if an unlimited vacation plan is executed correctly, it may end up requiring even more admin than a traditional plan.

To make sure people are using their time and that it’s being taken fairly, employers should have clear policies in place about how it’s granted, how many days each employee is taking, and when. If not, you run the risk of employee burnout or discrimination claims.

If you do insist on providing an unlimited vacation policy, best practices include:

  • A very clear written policy about how to ask for time off and the criteria that will be used for approving/denying the request.
  • Track the time everyone is taking to make sure people are taking enough, and that it is being granted fairly.
  • Create a company culture where taking time off is truly okay.
  • Some companies are mandating a minimum amount of days off, or giving money bonuses for taking vacations!

If you’re second-guessing unlimited vacation policies, here are some alternatives:

  • Traditional accrual policies. If you want to make sure they feel valued, simply grant them more time!
  • Company-wide days off, where the entire company closes. Then employees can unplug and not have to worry about coming back to a big backlog.
  • A PTO policy that combines vacation days with sick days, all granted upfront. That way, you’re compliant with paid sick time requirements, the employee feels that they have the flexibility to take the time they need, and you can avoid some of the admin headaches that come with other alternatives.

You can find the entire Monthly CEO Advisory for April by Clicking Here. If you’d like to learn more about best practices for your company policies, ABL can help. Book an appointment with us by Clicking Here.