Unlimited annual leave sounds too good to be true.
Imagine being able to take as much time off as you want, whenever you want. Imagine what you could do! You could spend entire winters on sunny beaches, safe in the knowledge that your job will still be there when you get home. Your holidays could become full-blown expeditions! Goodbye weekends in Cornwall, hello three-month Himalayan treks!
Unfortunately, like many things that seem too good to be true, unlimited annual leave is the sort of idea that may only look good on paper.
And yet, some organisations swear by it. It cannot be denied that unlimited annual leave has been good for some businesses.
The question is, would it be good for your business?
In this post we’ll talk about the case for unlimited annual leave, and the case against.
The Benefits of Unlimited Annual Leave
Some of the world’s most successful businesses offer unlimited annual leave as part of their employee wellbeing programs.
Netflix, for example, boast that they only hire “fully formed adults”, and that they treat them as such. A big part of treating staff like adults is, apparently, offering unlimited annual leave. Many believe that this policy is a key part of the streaming platform’s enduring success.
Indeed is another company to offer unlimited annual leave. The only restriction is that all leave must be approved by a manager. Beyond that, there’s no minimum or maximum leave allowances for full-time employees.
They explicitly state that it’s a move to support a good work/life balance for all employees. Giving employees the autonomy to manage their own workloads and schedules also empowers employees, making them feel trusted, valued, and respected.
Bryan Chaney, Indeed’s director of talent attraction, explained: “Not only is it better for people to be able to take time off when they need it, so they’re not worrying when they have emergencies or they need balance in their life, but if we treat people like adults, they typically behave like adults.
“It’s giving employees that freedom to make the decision, to use their time how they need to use it to hit their goals.”
Can Unlimited Annual Leave Reduce Unplanned Absences?
Overwork can lead to stress, anxiety, and other harmful conditions. If employees are allowed to take off as much time as they want, they may be less likely to work to the point of exhaustion.
That’s certainly the effect some companies see when they introduce unlimited annual leave policies. Australian consulting firm Inventium claimed that sick leave levels fell by 50% in two years after they introduced unlimited annual leave.
Business owner Dr Amantha Imber said that she introduced the policy to reduce unpaid overtime. Many of her consultants used to work more than 50 hours a week, which Dr Imber admitted was “not good for anyone. It’s not good for staff, it’s not good for the business when people are doing all this unpaid overtime and presumably getting pretty worn out or burnt out in the process. That’s terrible for productivity.”
Dr Imber’s firm used to put a cap on annual leave, but no cap on the number of hours employees could work in a week. For her, introducing an unlimited annual leave policy was simply a means of redressing the balance to make things further. If cases of unplanned absence have halved in just two years, her gamble certainly paid off.
The Case Against Unlimited Annual Leave
Many are dubious about the potential benefits of unlimited annual leave. Indeed, we included it in our list of the less-successful employee benefits.
A major problem is that, when a business introduces an unlimited annual leave policy, there’s often a trade-off. Take Netflix, for example. Yes, employees can take as much time off as they need. But in exchange for this, they’re expected to work very, very, very hard.
Any employees who don’t make the grade are “quickly shown the door.” They get a generous severance package, granted. But we suspect that many would prefer job security with a manageable workload.
When Unlimited Annual Leave Backfires
Dr Imber of Inventium found that introducing unlimited annual leave resulted in more leave taken, and fewer cases of unplanned absence as a result. But some companies who offer this supposedly generous policy see the opposite effect. When faced with unlimited annual leave, some employees end up taking less leave overall.
André Spicer is professor of organisational behaviour at the Cass Business School. He pointed out that only certain kinds of businesses seem willing to experiment with unlimited annual leave.
“The companies that offer this policy,” he said, “tend to be demanding and all-consuming workplaces. So taking time off can make employees feel guilty, particularly as it may show their boss and their colleagues that they are not fully committed.
“If you are up for a promotion against another colleague, it is unlikely that you’ll book that two-week break. This means employees often end up taking less time off, not more.”
Is Unlimited Unplanned Leave Bad for Business?
Some companies introduce unlimited annual leave policies because they genuinely value their employees’ wellbeing. But some companies might introduce these policies for reasons that aren’t so benevolent.
If employees are allowed to take as much leave as they need, then technically businesses do not need to account for holidays that they would have previously owed to employees. This can result in an overly competitive culture in which anyone who takes any time off may be viewed with suspicion and resentment. It’s a recipe for stress, anxiety, overwork, burnout and disaster.
Virgin is another company to offer unlimited annual leave. Richard Branson blogged about the decision, and his words hint at the culture of suspicion and resentment that may spring from such a policy:
“It’s left to the employee alone to decide if and when he or she feels like taking a few hours, a day, a week, or a month off, the assumption being that they are only going to do it when they feel 100% comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business – or, for that matter, their careers!”
The key word there is “assumption”. If there’s ever any doubt that a period of leave might lead to problems, far too many employees might err on the side of caution and not take any leave at all.
Is Unlimited Annual Leave a Good Idea for Your Business?
You have a legal obligation to offer your employees a certain amount of paid holiday each year. You also have a duty to ensure that employees take this time off. Otherwise, you can look forward to increased levels of stress and anxiety, and increased employee absenteeism across your business.
Unlimited annual leave might create an excellent work/life balance for all your employees. But it’s a gamble. If it pays off, you could see increased job satisfaction and reduced levels of unplanned absence. But if it backfires, you could create a toxic work culture that’s defined by overwork and resentment.
Is it a risk you’re willing to take?
Whatever policy you go for, whether it’s unlimited annual leave or a more traditional system, your policies will only pay off if you make it as easy as possible for employees to book the time off they need, when they need it.
With our absence management system, employees can make a leave request and receive confirmation in a matter of minutes, with just a few clicks. And with a clear overview of your operations, everyone will be able to see, at a glance, just how their absence will impact the rest of the team and the rest of the business.