The Illusion of Unlimited Vacation

Remember the unlimited vacation trend? Many companies ranging from startups to multi-billion dollar corporations offered unlimited vacation as part of their paid time off policy, and some still do. In today’s post we’ll go over the illusion of unlimited vacation policies and why the idea isn’t as sweet as it sounds.

What is Traditional Vacation Time?

Traditionally, vacation time (or paid time off) is given to employees in exchange for the hours they work. Some employers front load the time, others give the time as it’s earned. In either model employees have an allotment of time to use, usually within a certain amount of time.

Employees are sometimes discouraged by the idea of traditional vacation time because they feel that the amount of days they are given isn’t enough or if they don’t use the time that they are losing out on a benefit that they’ve earned.

What employees sometimes forget about traditional vacation time is the value of how much their time is worth. Traditional vacation time is earned (or accrued), meaning vacation time has a monetary value.

What is Unlimited Vacation Time?

Unlimited vacation time is when an employer gives their employees “unlimited” time off instead of a specific allotment of days or hours throughout the year. I use “unlimited” because in most cases, unlimited vacation is usually tied to a policy that outlines when and how much time can be taken off. For example, an employer with an unlimited vacation policy might have rules in place that limit vacations to one week at a time, or approval given at their manager’s discretion (depending on the needs of the business). Case in point, unlimited isn’t truly unlimited.

Consequences for Employers: Traditional Vacation Time to Unlimited

There are virtually no consequences for an employer offering unlimited vacation other than the need to create a policy addressing and defining the rules/limitations of said policy.

There are however amazing benefits. For all my accounting friends out there - imagine a world without vacation accruals! With an unlimited vacation policy employees are no longer earning their time; therefore, employers are no longer accruing for potential payouts for when an employee leaves the company.

Consequences for Employees: Traditional Vacation Time to Unlimited

We’ve all heard the saying “one person’s loss is another person’s gain”, right? Well, in this case the employer is gaining the advantage of not having to accrue for vacation payouts at the same time employees are losing the potential for said payouts. As I mentioned above, switching to an unlimited vacation policy eliminates the practice of earning the time. If you aren’t earning the time, you aren’t owed the time.

My Thoughts

As I titled the article, I believe unlimited vacation policies are illusions. The irony is a lot of employees want them for the sake of it being “unlimited”. Employees rarely understand that (i) unlimited vacation still means there are rules and guidelines that must be followed; and (ii) they will lose out on the payout of their earned vacation time upon leaving the company. On the flip side of the coin, so many employers are against unlimited vacation policies because they fear employees will take off all the time not realizing that (i) there are still policies in place to meet the demands of the business; (ii) studies have shown that most employees end up taking less time off with an unlimited vacation policy; and (iii) they are saving a ton of money on not having to payout earned vacation time.

With that said, unlimited vacation policies, while popular at one point, can be misleading. Who really benefits from such a policy? In my opinion, best practice should be offering employees a generous amount of vacation days with a limit on how much (if any) they can carry over year after year.