Is unlimited annual leave all it’s cracked up to be?

Unlimited annual leave sounds like the ultimate workplace perk. Take as much time off as you want, whenever you want. No carryover spreadsheets, no accrual maths, no awkward “can I take those extra two days?” conversations.

It’s a policy that’s been making headlines for years and is often touted as the next big step in flexible working. But is it really the game-changer it’s made out to be? Or is it, as some experts suggest, just a “sticking plaster” for deeper workplace problems?

Why unlimited leave is gaining traction

The rise of remote and hybrid working has completely shifted employee expectations, with flexibility no longer being just a nice to have. Employers, under pressure to stand out in a competitive labour market, are now exploring innovative perks to attract and retain talent, and unlimited annual leave is one of those headline-grabbing benefits that signals trust, autonomy and a modern approach to work.

And for good reason. Research shows that less than 40% of UK adults took all of their annual leave allowance in 2022 and 2023, and more than 60% left some of their holiday entitlement unused. Many cited guilt, pressure from management or workplace culture as reasons for not taking their full allowance. In theory, removing the cap should give people the freedom to rest when they need it and improve wellbeing and productivity in the process.

Less than 40% of UK adults took all of their annual leave allowance in 2022 and 2023.

The promises

There’s no doubt that, done well, unlimited annual leave can have significant upsides.

Work-life balance and wellbeing

Giving employees the power to manage their own time off can reduce stress, improve mental health and prevent burnout. It shows that an organisation trusts its people to make responsible decisions, which can go a long way in building loyalty.

Recruitment and retention

As part of a benefits package, unlimited leave is a powerful differentiator. In a crowded jobs market, it signals that you’re a people-focused employer that values outcomes over clock-watching.

Productivity and performance

When employees feel trusted and refreshed, they’re more likely to perform at their best. There’s also a mindset shift: the focus moves away from “time served” to “results delivered”, which can boost efficiency.

Administrative simplicity

Unlimited leave can also lighten the load on HR teams. There’s no need to track entitlements or manage carryover, and employers don’t face the financial liability of unused holiday payouts.

The pitfalls

However, the reality isn’t always as rosy as the policy brochure suggests, and many organisations have learned that the hard way.

The guilt paradox

Despite good intentions, unlimited leave can actually discourage people from taking time off. Without a clear entitlement, employees worry about overstepping or being judged for taking too much. Many employers who have introduced the policy have found that workers end up taking less holiday overall, which undermines the very wellbeing benefits the policy is supposed to deliver.

Cultural pressure

Peer comparison plays a huge role here. If most people are taking two weeks off, will you really feel comfortable taking four? A policy meant to support wellbeing can backfire if the culture doesn’t actively encourage people to use it.

Potential for abuse and resentment

On the other end of the spectrum, some employees may take advantage of the policy, leaving colleagues to pick up the slack. Without clear guidelines, managers may struggle to address excessive leave use without seeming inconsistent or unfair.

Compliance and legal complexity

It’s worth remembering that UK law still mandates a minimum of 28 days’ paid leave (including bank holidays) under the Working Time Regulations 1998. Unlimited policies do not override that, and employers must still track time off to ensure compliance, manage holiday pay on termination and record leave for regulatory purposes.

Is it really solving the problem?

Here’s the uncomfortable truth: unlimited leave doesn’t always address the real issue, which is workload. If people are too stretched to take time off in the first place, removing the cap won’t change that.

This is why unlimited leave can sometimes feel more like a branding exercise than a genuine wellbeing initiative. It sounds progressive, but without the right foundations such as realistic workloads, strong leadership support and a culture that celebrates rest, it risks becoming an empty promise.

Making unlimited leave work in practice

For some organisations, unlimited annual leave does work – and work well. The difference lies in how it’s implemented. If you’re considering it, here are a few steps that can make or break its success:

• Set clear expectations. Encourage people to take a healthy minimum (for example, at least the legal minimum requirement of 28 days a year) to avoid presenteeism and guilt.
• Lead by example. Senior leaders and managers should visibly use the policy themselves and talk openly about taking time off.
• Track and review usage. Even if you’re not capping leave, monitoring patterns helps you spot underuse or potential abuse.
• Tie it to performance. Make sure goals and outcomes are clear so time off doesn’t impact accountability.

Check your culture. If overwork is part of the DNA, tackle that first. No amount of unlimited leave will fix it.

Verdict

Unlimited annual leave is neither a miracle solution nor a gimmick. It’s a policy that reflects a deeper shift in how we think about work, one rooted in trust, flexibility and outcome-based performance. But without the right culture to support it, it can quickly backfire, leaving employees more anxious, not less.

If you’re considering it, the best first step is to ask your people. Use surveys to gauge appetite, run a pilot scheme and treat it as part of a broader wellbeing strategy, not the whole solution. When paired with thoughtful leadership and realistic workloads, unlimited leave can be a powerful tool to support engagement, wellbeing and retention. Like any policy, though, it’s only as effective as the culture behind it.

Unlimited annual leave can deliver on its promise, but only if the workplace is ready for it. If it’s used as a quick fix, it’s likely to fail. If it’s implemented as part of a bigger shift towards trust and flexibility, it could become one of the most valuable benefits you offer.