Founder KinHR
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Why unlimited holiday policies are just hype

23rd Oct 2014
Founder KinHR
Blogger
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When people hear the word "unlimited" they tend to get excited. Unlimited refills, unlimited downloads, unlimited miles, all awesome. But unlimited holiday leave? That has to take the cake, as we Americans say.

Most recently Richard Branson of The Virgin Group announced that his employees could take unlimited holidays, sparking excitement across the international blogosphere. However when employees in the UK only take 77% of their total allotted annual leave (with the numbers getting even smaller in the US) you have to stop and consider the effects that these policies, or non-policies, have on a workforce that is already leaving a significant amount of holiday leave on the table. 

In order to better understand how these policies work, it helps to think about it from a business perspective. Every company handles holiday leave in a unique way.

Some give it in one lump sum each year. Others give it incrementally over time (called ‘accruals’). Some companies, like Virgin and Netflix, do nothing at all. Their policy is no policy, and it often carries two characteristics:

  1. The first is holiday leave is given in unlimited amounts.
  2. The second is holiday leave simply goes untracked.

The idea behind unlimited holiday leave is that we’re all adults, and we don’t need a policy dictating when and how much we’re allowed to be away from work. There are plenty of companies out there that do it with varied success, and it’s increasingly common with small tech and design shops. But while neither characteristic is necessarily terrible, taken together they can create a big blind spot for employers, and in my opinion, they can be unfair to employees.

Here's why:

Employees won’t take holiday leave.

With no constraints or guidelines for how holiday leave works, employees tend to not consider it as part of their compensation and as such won’t use it. That means longer hours at work, less time spent decompressing, and ultimately higher churn. Matthew Yglesias over at Slate argues this is exactly the employer’s intent when they create this kind of time off policy. Interestingly, Evernote, a company with unlimited holiday leave, counters this by paying people $1,000 to take at least a week off during the year.

Employers don’t know how much time-off costs.

Every year when a company looks at budgets, it should understand how much holiday leave (holidays, sick leave, etc.) cost the company in the prior year, and how much it anticipates it will cost in the coming year. Why? Because like any other expense, it can be wasteful and misused if left untended.

Companies don't value their employees' personal time.

If a company doesn’t care about getting its team out of the office, what other aspects of work life don’t they do a great job at? Holiday leave is what I call a “gateway policy” at a startup. Along with payroll, it’s among the first things to be considered from a human resources perspective when starting a new company.

Decisions aren't made strategically.

Companies that don’t track holiday leave balances probably aren’t tracking it on a calendar either. That means uninformed decisions about when it’s best for team members to be away from work, and that means missed deadlines and poor resource planning.

There are certainly upsides to unlimited holiday leave. One good thing is that there’s less of a rush at the end of the year of folks cashing in their final holiday leave before they lose it in the new year. But, the fact is, it’s the holidays. People don’t want to work then anyways, and most offices are closed or only “meh, kind of open” during the latter half of December.

Note that I am not in favor of HR policies for the sake of policies; especially at small companies. What I am in favor of is clarity for employees. Taking the time to create a well-considered approach to employee holiday leave conveys professionalism to your team, and that’s often a missing quality at small, but growing employers.

We used to have unlimited holiday leave and did a pretty poor job of getting folks out of the office. We’ve since moved to a staggered (and generous, by American standards) policy that gives our team ample time to get out of the office, but also a means of understanding that it’s part of their compensation. That’s why it’s called paid holiday leave, after all.

Moral of the story? Even if you give unlimited holiday leave to your team, make sure you track how much employees are taking and, just as important, ensure there’s a good amount of communication about when people are taking holidays by using a team calendar. It keeps your team informed and fresh, and it paints a better financial picture of your company’s performance. 

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