Unlimited Vacation: Too Good to be True?

By: Lindsay Coobs

The idea of providing unlimited vacation to employees has been creating a lot of buzz recently. Is it really as good as it seems?

Why is this Trend Emerging?

Many top companies in recent years, like Netflix, Virgin, GE, Hubspot and LinkedIn have adopted various versions of unlimited paid vacation or time off policies. There are many reasons for the switch including: attraction and retention of employees; demonstration of trust between company and employee; increase employee well-being and productivity and to limit the company’s own financial liability. Unlimited vacation is when a company allows employees to manage their own time off schedules while at the same holding them accountable for the same high levels of work performance.


In recent years, unused accrued vacation has become a huge burden for companies. In 2015, it was reported there was a $272 billion of accrued and unused vacation sitting on the balance sheets of US companies, according to Project: Time Off. That accounts for 658 million unused vacation days.


Taking vacation is important and necessary for employee well-being. A 2013 Society for Human Resource Management (SHRM) study found that 75% of HR professionals report that employees who take most or all of their vacation time perform better than those who take less. This leaves many companies looking for ways to mitigate cost while at the same time taking measures to avoid burnout and turnover of top talent.


The Caveat

Employers that do implement unlimited vacation or paid time off need to ensure transparency and consistency with communication. Employees may initially be reluctant or fearful to use unlimited vacation without established boundaries. Project: Time Off found that 80% of workers said they would use more of their PTO if their boss encouraged them to do so. The same study also found that two-thirds of employees hear negative or mixed messages—and, most frequently, nothing at all— about using vacation time, despite 91% of senior business leaders agreeing that time off from work delivers benefits to their employees and companies.


Alternatives to Unlimited Vacation

Some companies are starting with smaller changes, like a use-it-or-lose-it policy. According to Project: Time Off, of companies that have a use-it-or-lose-it policy, 84% of employees use all of their earned time off, compared to just 48% of employees who have the option to roll over, bank or be paid out for unused time. Additionally, here are other examples of innovative ways to mitigate vacation/time-off costs while at the same time reinforcing productivity and work-life balance:


  • RAND Corporation, a nonprofit headquartered in San Francisco, CA, has Sabbatic Pay, which offers 3% of monthly base salary for every vacation day taken. Employees who take all 20 days offered are given an additional 5% of their annual base salary.
  • FullContact out of Denver, CO has a Paid Paid Vacation policy, which gives each employee 15 paid vacation days and an $7,500 cash once per year to use while on vacation. The only requirements to receive the cash payout are: 1. They must go on vacation to get the cash; 2. They must disconnect; and 3. No work can be performed while on vacation.
  • Motley Fool, a financial advisory firm out of Alexandria, VA allows employees to take any reasonable amount of paid time off. In addition to that, it also has the “Fool’s Errand,” where once a month an employee is selected at random to take two weeks off from work within the next month.


While unlimited vacation is not right for every company, there is a push with companies to modernize the way the reward their employees with vacation and paid time off. Technology is moving us away from the Ford era 9-5 work days and into increasingly flexible work arrangements. A vacation policy will live and die by company culture, so business leaders need make this decision based on their company’s own unique philosophies. If your company is looking for ways to improve your vacation or paid time off practices, contact an HR Consultant at Employers Advantage to help your company discover best practices that will limit your financial liabilities and improve employee well-being.