Unlimited Vacation Time? It’s Not as Crazy as It Sounds.

Date: August 27, 2013

Increased loyalty, productivity, and even financial savings occur when employees enjoy flexible time off.

An emerging trend in businesses has slowly yet steadily been gaining traction—unlimited paid vacation. A 2012 Society for Human Resource Management survey found that 1 percent of businesses offered their employees unlimited paid vacation. Is it a good idea for your business to revamp your leave policy?

What Does Unlimited Vacation Time Mean?

Such a policy allows employees to take paid vacation without worrying if they have accrued the necessary amount of vacation time. It relieves administrative headaches that can occur frequently when dealing with paid vs. unpaid leave. Such policies also allow employees to focus more on work and less on meticulously calculating timesheets. Just ask Netflix, Evernote, and Morningstar—three companies whose employees enjoy as much time off as they want, assuming the job gets done.

When people are treated respectfully
and allowed to have a balanced
work/personal life, they respond with
respect and kindness themselves.

From a financial standpoint, an unlimited paid-vacation policy can actually save money for businesses. If a company implements this kind of policy, employees no longer accrue vacation time. This means if/when an employee leaves a company, the employer doesn’t have to reimburse that employee for unused vacation.

Writing for LinkedIn recently, Forbes and Inc. columnist and entrepreneur Ilya Pozin said, "Allowing your employees to take time off when they need it most encourages a more productive work environment. Instead of working when their minds are elsewhere, they’ll be able to give you their full attention."

RELATED: 6 Ways to Motivate Employees Using Little to No Money

What About Small Businesses?

This approach is not just for large corporations—small businesses can implement similar policies and see positive results. But such policies must be tailored for any company that wants to give it a try.

Rosemary O’Neill, president and co-founder of Social Strata, a social-content technology company based in Seattle, decided to overhaul her company’s policy in 2010 after her COO’s husband fell ill. "We were preparing to offer [the employee] as much time as she needed off with pay," she says, "and we decided that we trusted all of our employees the same way we trust her, so we just decided to offer that benefit to everybody."

Although Social Strata has fewer than 15 full-time employees, the switch to an unlimited paid-vacation policy has been extremely successful. Rosemary credits the success of the implementation to her staff.

In fact, asked how other small businesses could implement similar policies, she recommends starting with the hiring process. "Be sure that you are hiring people who are self-motivated and who believe in what you're doing as a company," she says. Having an unlimited paid-vacation policy also could help your company's recruiting efforts.

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Will Unlimited Time Off Work for Your Business?

While offering employees an unlimited vacation policy can work wonderfully for some businesses, others cannot practically implement such a policy. Unlimited vacation time works better in certain fields such as technology, consulting, or other businesses in which employees can potentially work remotely and cover each other’s duties in times of need. In businesses where each employee performs a specific task, such as cashiering or waiting tables, a more traditional vacation policy would ultimately serve the business better.

RELATED: 5 Perks that Boost Recruitment

How Can You Implement Unlimited Vacation Time?

First, establish boundaries for what "vacation" means. Most companies with an unlimited vacation policy require employees to obtain supervisor approval before taking time off. This ensures that there is always sufficient attendance and unaffected workflow.

"This type of policy requires buy-in and support from every single person, since we often pitch in to help one another when someone needs to take [time] off," explains O'Neill. This method of collaboration plays an especially crucial role in small businesses, where there are fewer employees to cover others' work in times of absence.

Some companies require employees to take a minimum amount of time off. Social Strata's employees must take at least two weeks of paid vacation annually. Their employees' days off are tracked to ensure that no one is abusing the system. In the three years since implementing the new policy, there have been no instances of excessive absences at Social Strata.

"When people are treated respectfully and allowed to have a balanced work/personal life, they respond with respect and kindness themselves." O'Neill adds.

RELATED: Unusual Employee Perks to Keep Your Small Business Staff Engaged


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