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Unlimited vacation isn’t as crazy as it sounds – and it can save you money

By August 8, 2019No Comments

(This post originally appeared on The Guardian)

Want to attract employees to your company in this very competitive work environment? It may be time to seriously consider offering unlimited vacation. Yes, you heard me. It’s not as crazy as it sounds – and there could be a very significant indirect perk for you, the employer, too.

Today’s workers love unlimited vacation plans, and many employers are already responding to this demand.

About 12% of 1,000 US workers polled as part of a recent study from Allianz Global Assistance said their companies already offered unlimited time off. More importantly, a full third said they would give up a portion of their salary in exchange for unlimited vacation. Not surprisingly, millennials – defined as someone between the ages of 18 and 34 and who make up almost half of the US workforce – are the most in favor.

And you know what? Good for them. How dare they want to have more flexibility and time off to spend with their families? How could they even consider that spending time doing leisure and fun activities would be a better way to live their lives than working in our offices? Kids today, huh?

This is why unlimited vacation plans are not a passing fad. According to a recent report on Quartz, postings on the jobs site Indeed with unlimited vacation plans rose from just 450 per million in 2015 to 1,300 per million in 2019, a 178% increase. Tech firms, such as Dropbox, HubSpot and GitHub, are among the leaders in doing this because of the nature of their work (development, support) and the makeup (yeah, millennials) of their workforce. But the share of non-tech employers is markedly on the rise, too.

If your firm doesn’t offer unlimited paid time off there’s no reason to panic. You’re still among the great majority – only about one in a thousand postings on Indeed have offered the benefit. But that doesn’t mean you can ignore this rising trend. People are asking about vacation policies. Prospective employees love the idea of unlimited time off.

When I bring up the idea of unlimited vacation to business groups I’m usually met with a collective roll of the eyes. I get it. Unlimited vacation plans may seem like a huge cultural shift for your business. You may be justifiably concerned that some employees will take advantage. Once you implement this kind of thing it could be tough to take it back if it’s not working out. But before you rule out the idea, consider this: it could save you a boatload of money. Why?

It has to do with payout. What happens to unused vacation at the end of the year? Or when an employee leaves? The rules are pretty specific when you offer a specific number of days that an employee has earned, or accrued, over a specific period. Those earned days are compensation and are due to that employee. Your company probably has a policy about carrying over those days to the next year. Many states have laws that require that employers to pay out unused vacation when an employee leaves.

But what about unlimited vacation? That’s when things get murky.

Where there’s no way to calculate the days earned under this type of plan, the laws are pretty silent. There are no “carryover” days when there’s unlimited vacation. There are no “accrued” days when an employee goes a separate way. Which means that when an employee leaves your company it’s very possible that you may not owe any payout at all. “It’s [unlimited vacation] a great recruiting tool,” Jonathan Yarbrough, an employment lawyer, told the Washington Post. “And generally upon termination, there’s nothing to pay.”

Oh, and one other thing: studies such as this one have found that employees working at firms with unlimited vacation plans have actually been taking less vacation – about two full days a year – on average as compared to firms that offer more traditional plans. Apparently there’s a psychological effect on workers when the choice of how much time off to take is left up to them instead of fixed by their employers. Regardless, those two days of untaken vacation extrapolated across your workforce adds up to a serious saving.

In the end, the vacation benefits you offer should best suit the interests of your employees and your company’s culture. An unlimited paid time off plan may not be the right thing for your business. But considering some of the potential financial benefits, you should at least be seriously considering it.

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