When it began, unlimited holiday was heralded as being a radical approach to improve employee wellbeing, with companies like LinkedIn and Netflix using to apparent success. However, when applied in the UK, legislative requirements for holiday entitlement make this practise challenging on a legal and practical level. Besides this, the benefit can have the opposite results to what it intends to do.
Advantages of unlimited holiday
Unlimited holiday sounds great on paper, and offers some great benefits which are particularly effective in the US, where there’s no statutory minimum level of annual leave (unlike the UK).
Wellbeing. Employers are taking up unlimited holiday because it’s seen as a way to establish a positive company culture. By giving employees free rein on their holiday allowance, they’re able to manage their time effectively and not worry about running out of leave for emergencies or opportunities outside of work. This could lead to a greater work/life balance and workplace satisfaction.
Improved productivity. Many employers agree the amount of time employees are working is less important than the quantity and quality of work produced. As overwork can lead to stress, absence and burnout, allowing staff to take unlimited time off can refocus their goal on their output, rather than working long hours. This can result in improved productivity.
Recruitment and retention. This perk can also attract talent to the business, and encourage current employees to stay, having more freedom and flexibility over their workload.
Considerations of an unlimited holiday approach
Starting an unlimited holiday perk in your company can make things very complicated. Here’s what employers will need to consider if rolling it out in their business:
There will still need to be a process for managing leave. What will this be?
How will you deal with conflicting requests? What gets priority?
What rights will your business have for approving and rejecting requests? How do you avoid discrimination in this process?
Is there any carry over and how is this calculated?
Will you have a maximum number of days an employee can take off in one go?
What performance targets or metrics will you use to measure when people have done enough work to take the extra time off?
How will you measure under-performance?
How would your organisation manage their H&S obligations – such as ensuring safety critical staff are present in required numbers to complete tasks safely (First Aiders, Fire Wardens, Lift Supervisors, etc.)?
How do you include this scheme in your employee contracts whilst maintaining compliance? Simply referring to holiday entitlement as “unlimited” in your contracts risks falling foul of employment legislation. So you might have to make a distinction between the statutory minimum holiday entitlement and an extra ‘unlimited’ entitlement on top of that.
It’s your legal obligation to encourage that workers take the statutory minimum holiday entitlement (5.6 weeks pro rata). Unlimited holidays mean workers could fail to take the statutory minimum, meaning you fail your obligations as an employer. How do you prevent this?
Why unlimited holiday rarely works in practise in the UK
Employees actually take less time off
Companies who’ve trialled the unlimited holiday approach say one of the main drawbacks is employees don’t take anywhere near their statutory minimum level of leave.
When employers turn holiday from an annual legal entitlement into a ‘nice to have’ benefit, there is an attitude shift towards it. Instead of being seen as a right to the employee they should take, it’s reframed as an extra perk that’s not necessarily ‘theirs’ i.e. a necessity to use.
Anxiety about taking time off
Linked with this is the increased anxiety staff might feel about taking time off, as without a given benchmark number of holiday days, they’re not sure what’s an appropriate amount to take off.
As unlimited leave entitlement is often driven by performance metrics, people might be anxious to take time off as they feel when and how they take holiday is more dependant on workplace demands and their colleagues’ expectations.
In any organisation, there are always employees who have a bigger workload than others. Unlimited holiday can mean busier employees are deterred by taking time off because they haven’t got their to-do list done, or are worried about returning to a mountain of work when they come back. This can mean they take less leave, and have to cover more often for colleagues who have less to do and therefore feel able to take more time off. This establishes a cycle where additional strain is put on certain employees and not others.
Difficult for employers to manage
The legal obligations employers have to their staff and practical considerations mentioned above can make this challenging for employers to manage. For example, how do they deal with conflicting leave? How do they ensure there are enough members of staff in the office at one given time, but are at the same time not deterring employees for taking their leave?
Managing this poorly can lead to a bad business culture, where staff are ‘always on’ and feel unable to take full advantage of their entitlement.
Alternatives to unlimited holiday allowance
With these challenges in mind, many employers have decided to offer other benefits for their employees instead of rolling out unlimited holiday entitlement.
Alternative options include flexible working, which has some of the same employee benefits such as better work/life balance and greater control of their schedule. The four-day work week is currently being trialled in the UK by around 30 companies. As an equally radical approach to the future of work, it also may lead to happier and more productive employees, as well as significantly boost recruitment and retention.
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Karis Lambert is Moorepay's Digital Marketing Executive, having joined the team in 2020. Karis is CIM qualified, and keeps our customers up-to-date with Moorepay's market-leading knowledge and advice through our digital channels, including the website.