Unlimited Vacation: It's About Morale & the Bottom Line

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Unlimited time-off policies are having a moment, and it's really no surprise. The idea of giving employees as much time as they want is fascinating. Yet, policies for unlimited time-off remain few and far between. Less than one percent of employers, according to the Society of Human Resource Management (SHRM), take this type of approach.

Why Unlimited Time Off?

Some organizations, like Netflix, choose to go the unlimited route because they believe the flexible vacation policy builds an ownership mentality. There, exempt employees take off as much time as they want and no one tracks it. They focus on what people accomplish, not how many hours or days they work, as explained in their "Freedom & Responsibility Culture" slide show.

Virgin chose to go with unlimited time-off to both attract talent and increase productivity. Their thinking was that, if employees take the time they need for their personal lives, they'll return refreshed and ready to devote themselves to their work.

Does Unlimited Time-Off Increase Productivity?

According to the latest Harris poll, the average American employee with paid vacation took just more than half of their allotted leave in the previous year. The same poll reported that 25 percent took all their leave, 40 percent took a quarter or less and 15 percent took none at all.

That doesn't bode well for the organization or the worker, according to a Gallup study on engagement, because an overtired employee is an unproductive one. Without balance people become less committed to their work, and the ensuing burnout has proven to be key factor in employee disengagement.

SHRM's Vacation's Impact on the Workplace report shows that people ultimately have limited potential attention. When they're given both short and long breaks, however, their performance improves. More than 90 percent of HR professionals who participated in the report believe vacation improves wellness as well as performance and productivity.

Financial Impact

Workers' as well as organizations' bottom lines suffer when traditional vacation time isn't used. Businesses are saddled with liabilities from unused leave when workers deny themselves time-off.

With unlimited time-off policies, notes a Bloomberg Law Report, time spent record keeping is eliminated for employers. There's no direct financial cost, no leave accrues, and therefore no unused time is paid out at termination.

What Can Be Learned?

Although it may not be logistically possible for some organizations to fully adopt an overarching vacation policy overhaul, there are a number of takeaways that can be gleaned from the efforts of these other organizations.

Your policy should be clearly articulated

Ambiguous time-off policies leave employees under greater stress because it's not immediately clear what the culture within the organization is really saying about time-off. This creates a greater potential for burnout and eventually leads to turnover, according to Kin HR founder, Craig Bryant. There should be publicized guidelines so employees understand that time-off is a benefit they are encouraged to use.

Your policy should be fair

In a workforce institute survey quoted in a CIO article, "the number-one cause of workplace stress is inadequate staffing." Workers don't want to feel as though they have to pick up the slack or work longer hours because their coworkers are taking time-off. When they do, they feel disgruntled and treated unfairly. Employees need to know the organization has their back and is prepared to fill in the gaps with extra help.

Your policy should be automated and measurable

If you can't measure it, you can't manage it. Absenteeism comes with hidden costs that directly affect both productivity and the bottom line. The more accurately data can be tracked and managed, the more effectively your organization can gauge, plan and budget for the expense.

Moving Forward

Although it may seem contrary to common sense, generous, flexible and easily tracked time-off policies lead to greater productivity, lower costs, stronger engagement and increased loyalty. It's a matter of employees believing employers understand and want to contribute to a healthy work-life balance. The deeper they believe this, the lower their stress levels become, and the more solidly ingratiated into the organization they become. This is vital because happy workers create productive workplaces.