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Unlimited Time Off Comes with a Cost

Unlimited Time Off Comes with a Cost
Credit: Brian A Jackson/Shutterstock

Netflix, Glassdoor, Zynga and, as of last month, Virgin Group are among the giants of the corporate world who offer their employees unlimited vacation time. For most people, this sounds like a dream come true — in fact, a poll conducted by Yahoo found that 75 percent of respondents thought that unlimited vacation days for U.S. workers was a good idea. In theory, it might be. But what about in practice?

Since Richard Branson's September announcement about Virgin's new policy, there have been a slew of articles across the Web defending and, in more cases, denouncing unlimited time off. Arguments against vacation free-for-alls usually fall on one end of a spectrum: Employees won't take time off because there's no incentive to "use it or lose it," or employees will disappear for extended periods when the company needs them most simply because they can.

The former argument is certainly valid, since employers already have a hard enough time getting their workers to take time off — an April 2014 Business News Daily article cited statistics from Glassdoor that found 40 percent of employees take less than a quarter of their allotted vacation time — and on the other side, it's easy to see how certain employees might abuse the privilege. But the real problem with unlimited vacation policies is that it allows employees and employers to forget about the true costs of taking (or not taking) time off. [Would Unlimited Vacation Fly at Your Company?]

"A common misconception is that 'unlimited time off' means, 'It looks great to employees, and we don't have to manage it at all,'" said Craig Bryant, founder of HR software provider KinHR. "As an employer, it's important to understand how much time off costs the company each year, when employees are out, [in terms of] resourcing and project management, and most importantly, making sure that employees are indeed getting away from work."

"It is common [with unlimited vacation policies] that low performers will take more time than they should and good performers will work harder and take less time," added Claire Bissot, certified senior professional of human resources (SPHR) and HR consulting manager at business services provider CBIZ. "It is important for employers to remember that vacation is a benefit and a valuable one for employees to have balance."

Bissot noted that employers who opt for unlimited time off often do so for administrative reasons, and don't design the policy with employees in mind. While busy small business owners may see the eliminated HR burden of tracking and managing time off as a blessing, it's actually quite problematic, because work-life balance and employee satisfaction should be at the core of any company's vacation policy. She advised putting a cap on time off, but allowing for some carryover from year to year so employees aren't scrambling to use it up at the end of the year.

"This helps deal with when a business needs prevent employees from taking time [at once] and also prevents employees from trying to rush to use up their time before they lose it," Bissot told Business News Daily. "A solid policy should also have tiers for years of service. For example, on an employee's fifth anniversary, reward them with an extra week."

Another solution is to introduce a flexible work or telecommuting arrangement to help employees feel more in control of their work-life balance without even bringing vacation time into the equation.

"It can be difficult to get some things done when businesses are open during business hours only," Bissot said. "[Flex time] helps your employees by providing some time for their 'life work' [without making them] have to use vacation, which should be more for relaxation, adventure, recuperation or other ways to find balance."

A well-structured, balanced time-off policy can go a long way to show employees you care about their well-being, but only if you're diligent about enforcing it, and create a culture where vacation truly means vacation.

"We spend a majority of our waking hours at work so it's important to make sure that the few hours we have outside of work are spent disconnected from email, expectations and other work pressures," Bryant said. "That's all easier said than done, and it starts with the company not only stating it as a core value, but making a real effort to see it through."

Nicole Fallon

Nicole received her Bachelor's degree in Media, Culture and Communication from New York University. She began freelancing for Business News Daily in 2010 and joined the team as a staff writer three years later. Nicole served as the site's managing editor until January 2018, and briefly ran Business.com's copy and production team. Follow her on Twitter.