Benefits, HR News & Trends

Could Your Workplace Survive an Unlimited Vacation Policy?

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How many of you dream of taking a three week cruise in the Mediterranean followed by a couple of weeks touring European wine regions? All while getting paid for it with no concern about whether you’ll have enough leave for future vacations or sick time either. Sound too good to be true?

According to The Wall Street Journal, companies who offer unlimited vacations are increasing but employees are hesitant to fully embrace these policies. And indeed, my recent post about Netflix briefly mentioned their own unlimited vacation policy to which one commenter replied, “all you need vacation as long as you get your work done – really, on what planet?”

Are the skeptics right, or does unlimited vacation work in the right culture?

A lesson from Netflix

In the Journal article, Netflix says they discontinued tracking vacation back in 2004. Based on their own estimates, employees take 3-5 weeks off per year (better than before they claim). Discussions flow around how work will be done and how to accommodate when an employee is gone rather than focusing on the length of time they will be away.

There is a bit of a catch: be prepared to be tied to your Blackberry or laptop for part of your trip. From the story, it seems like this is the norm. Be away all you want but work still has to go on.

That may be nice but sometimes you have to unplug completely on vacation. Physical relaxation and renewal goes along with the mental part too. And not completely unplugging seems to plays in favor of cynics who think the unlimited vacation perk just sets the stage for working all of the time, no matter where you are at.

Another example: The Newman Group

When I saw this piece, I also remembered that The Newman Group used to have a similar policy before its acquisition by Korn/Ferry. I had the chance to go back and forth with former CEO Ed Newman (now writer of the Accidental Entrepreneur blog) and talk about what they did.

Newman had the unlimited time off plan in place for a six year period before the company’s integration into Korn/Ferry. The types of leave varied and allowed for casual time off (like a Friday off or a half day to take care of a doctor appointment), vacations (a week or more) and sick time (unlimited too, until disability kicked in). Most people didn’t take more than a week or two off for vacation (although one did take off a month after a long period without time off).

The why for Newman was simple. “My philosophy was that everyone working for me was an adult and worked hard. So if you need time off for something, just take it,” he said. “My experience was that people worked way more than 40 hours a week and if they took a Friday off, they had already earned it and deserved it. I felt like the accrual method was like nickel and diming.”

He also estimated that most employees took two weeks off (one planned, one for various casual days). That number seems right along the averages that CNNMoney mentioned a couple of months ago.

Differences in the unlimited vacation approach

Where The Newman Group differed from an approach like Netflix was that vacation time was truly vacation time.

“In a consulting business, there is always that pressure to put in the billable hours to make revenue. But the pressure was the same whether there is an accrual or not,” he explained. “With the ‘no limit’ policy, it made me really encourage people to take adequate vacations each year, and I needed to set the example. When I took time, I also made it a policy to not check email or voicemail, and I encouraged the same. Because when you take the vacation time, I want you to get the full benefit.”

And that really helps you take “unlimited” vacation policies with a grain of salt. How employers expect you to work normally, how you work while on “vacation,” and the peer culture that often dictates what the vacation norm would be, are really the determining factors in play. For some people, a Netflix approach where being away from the office is fine as long as you’re plugged in (at least some of the time) works fine. Others would prefer true time away from the office, even if it meant they weren’t necessarily encouraged to use more than industry norms.

Could you do it?

Of course, some in HR will think that companies are better equipped to know what employees can handle. Tracking it gives employers a bit of an easier way to see when someone may be due to take some time away. That being said, it is a compelling feature of “unlimited” vacation. If you could turn skeptics into believers and had the right culture to do it, it seems like it could work the same way it has for Netflix or The Newman Group.

What is your experience with unlimited vacation time? Do you think your company could handle it?

Lance Haun is an editor at The Starr Conspiracy, a marketing agency focused on the enterprise HCM market. He spent three years as an editor at ERE Media and seven years in the recruiting and HR trenches before joining the agency. You can follow him on Twitter, circle him on Google+, check out his blog or contact him directly at lance@coug.rs.
  • Steve Smith

    Great post, Lance. At Starr Tincup, we have an unlimited PTO policy, and we are happy with the results. Ed Newman is right: You hire grownups, let them take the time they need. Abuse hasn’t been a problem in the two years since we have had this policy. The biggest challenge is really disconnecting. We tell employees to be gone when they are gone. Most employees do, but some still check email and try to do a little work. Your mileage may vary. It works for us, but it may not work for everyone.

    • Lance Haun

      That’s always the challenge, Steve.

      I went up to Alaska a year ago and brought my cell phone only (but turned off data). Most of the time though, I didn’t have cell phone coverage. It was great. Very relaxing.

      For three day weekends, I usually take my laptop and just keep an eye on my smartphone. Less of an issue I think. But disconnecting is tough. Thanks!

  • http://twitter.com/MelissaBruno1 MelissaBruno

    Love the concept. It could be successful, if in fact, you are a culture of “grown-ups” and average demographic age has nothing to do with it! 

    I firmly believe that if your organization treats people like adults, they will behave as such.  Thanks for the food for thought!

    • Drew Koloski

      You didn’t love that policy 2 years ago :-)

      • Lance Haun

        That’s kinda funny :) 

        In all seriousness though, things change with time. I supported a few HR policies back in the day that I wouldn’t support now. 

    • Lance Haun

      I don’t know if you even have to do the whole culture of grownups thing. Having the right management mindset is probably the most important part. If your managers know how to manage toward accountability, priorities and results, you’re probably closer than you think.

  • http://pulse.yahoo.com/_CACU6KRJYB5FQ3DU6VK2UUCJZU Jermo

    Great post.  Very interesting concept.  I agree with Melissa that we should treat people as grownups and make sure that there are consequences for abuse.  Having said that making sure your employees are really engaged gives you a much greater chance that this approach can be successful.

    • Lance Haun

      Making the right hiring and retention decisions makes any new policy easier to deal with. Easier than it sounds too. But I appreciate what you’re saying here, you have to be prepared for varied outcomes (including abuse).

  • http://twitter.com/viravani Valerie Iravani

    I believe that more companies should consider unlimited time off – but need to set clear expectations and goals of what work needs to be done and by what deadline first. This will take training for all managers to help guide employees.  It also fits in with the increasing practice of work as project rather than set routine.  Both practices help to build engagement, loyalty, and creativity.

    I believe that many employees want the structure and satisfaction a somewhat routine job provides, but want to use it as an occasional jump off point for creative endeavors and passion-driven hobbies.  These bring energy back into the company and job.

    “Go for it!” I say.

    • Lance Haun

      Setting expectations is the biggest challenge. It requires honest communication about what is expected (something most managers look to a handbook or policy to set). 

  • Bonnie Michaels

    Excellent Post.  As I discussed this with Sue Shellenbarger for the Wall St. Journal article, it only works if you have a culture and managers that support the idea of vacations.  It has to be encouraged and modeled. 

  • Klaus Schneegans

    I like the grown up concept and agree with Melissa, experience show that when you treat people like adults they act like adults – for the most part. :-)   Does an open vacation policy lead to an unspoken expectation of “no time off”?  I would be interested to learn what those with these policies have done when the adults don’t act like adults and take “too much” time off. And who determines how much is too much?   I can see this work well in creative environments, where “getting the work done” is not time driven for the most part.  Interesting discussion!  

  • http://www.repeatablesale.com/ Scott Barnett

    One thing I don’t see mentioned when discussing unlimited vacation is what happens during a RIF/layoff?  In many startups where vacation is accrued, most of the staff have plenty of accrued vacation, since time off is not typical at a startup.  Then, when a RIF or layoff happens, at least the employee has a (small) cushion of pay.  I’m assuming in these unlimited vacation companies, since there is no accrual, there is nothing for the employee who is let go?

    • Saywhat_143

      That’s no different than having a savings in the event you are fired, the organization goes under or any other unfortunate event. It’s no different than making sure your paycheck stretches from one to the next so that you don’t over spend before the check hits the bank.

      All PTO really does is manages an employee’s finances for him. For example, an employee that gets $20 / hr and has 3 weeks of PTO is paid for 2080 hours for the year whether he worked it or took PTO. Take out PTO and give him the money when he works it, he still makes the same amount for the 2080 hours. The only difference is he doesn’t get paid when he isn’t working.

      That’s simple for hourly. For salary, that’s a whole different situation, and I’m still working on it. However, the basic philosophy is this: do we trust our employees to make the right choices, balance life / work and be productive? If so, then why do we feel it necessary to control their life / work balance with PTO? Those who abuse the system will weed themselves out.

  • Dave Will

    SO I’d like to implement this policy for my company, but I’m stuck on 2 things… one is the RIF or Layoff scenario that Scott mentioned. His thought is that there’s no accrual and therefore, no payout. BUT, the other issue is what if someone really takes advantage of it? Stopps performing and takes a ridiculous amt of time off. How do you address that? How do you let someone go for lack of productivity if you have a policy that states they can take time off anytime they want? Smells like a lawsuit. 

    Help me with this because I really want to do it!