Are unlimited leave policies viable?
Unlimited holiday leave. Dangerous or appealing? Many companies have tried it, and had a lot of success – but your policy probably needs some careful caveats.
In the UK prior to the pandemic, work-life balance was a nice-to-have wellbeing concept that was frequently pushed to the back burner in the face of more pressing business concerns.
However, the more wellbeing-centric Britain that we inhabit post-pandemic demands that work-life balance sits front and centre of HR policy.
Companies with the best and brightest wellbeing policies, with the delivery augmented via HR software, are getting an edge in the war to attract and retain talent in these turbulent times.
With this in mind, we weren’t therefore totally surprised to hear the UK job site Reed.co.uk reporting a 20% increase in jobs offering unlimited paid holidays as part of the benefits package.
At around 4% prevalence this is still not a very common perk, but this works in its favour. And that’s because employers that deploy unlimited leave via their HR software system have a real opportunity to stand out from the crowd in the wellbeing arena.
What was surprising was that the likes of Goldman Sachs were leading the way by offering unlimited paid leave: with their 95-hour week and anti-remote work policy, Goldman hadn’t always flown the flag for the contemporary wellbeing agenda in the UK. However, since unlimited leave is most commonly seen in large companies in the finance, IT, and digital media industries, Goldman’s move is clearly timely.
Just for salaried employees (not hourly workers)
A closer look at the Goldman policy shows they are not diving in at the deep end, as the unlimited leave policy is restricted to senior staff (partners and directors), who will be allowed to take as much holiday as they want under the ‘flexible holiday’ plans designed for ‘rest and recharge’. This can all be efficiently tracked using an HR software system. So, for Goldman at least unlimited leave seems to be viable only at senior levels.
Oracle also offers unlimited leave to its salaried, overtime-exempt employees, via its HR software system, and it is referred to as flexible holiday. But they still need to get approval, so they don’t go on holiday when their presence is essential.
General Electric has been offering unlimited leave to salaried workers (accounting for around half of its workforce), for some years now, but along with Virgin is one of the few examples of organizations outside the finance and digital sectors that are offering this perk. But this at least shows that unlimited leave has broader industry viability.
It’s not a free-for-all.
To be viable, unlimited paid holiday needs to be closely controlled, ideally using an HR software system, with policies sharing quite strict governance protocols.
For example, most of the unlimited paid holiday policies that we have observed require prior approval using a self-service HR software system before any leave is taken, and will only be granted if employees continue to meet their goals and objectives.
What we have also seen is that employees must have received a ‘good’ performance appraisal at their last review and must not be on a disciplinary or any kind of performance improvement scheme.
Notice must be provided, and this should be proportional to the paid holiday being requested.
The salaried employee needs to have liaised with colleagues and key stakeholders to ensure that expectations are managed, and deliverables are met.
Earned privilege, and not an entitlement.
Under these constraints, the unlimited holiday policy is likely to be workable, as the inherent requirement of the policy is that the employee must be performing well, and that goals and deliverables are being met.
It is an earned privilege and not an entitlement, and with this in mind, it probably should not be written into an employment contract.
The unlimited leave policy should be included in the handbook only and be subject to review, termination, and alteration at the company’s discretion. In all honesty, UK legal advice should be sought before enacting such a policy in the UK.
What about hourly-paid employees?
These unlimited leave policies have been mainly applicable to salaried overtime-exempt employees who are paid on results, not hours worked.
Such an unlimited holiday policy does not work for hourly paid employees because the organisation requires a specific hourly contribution from them on a continuing day-by-day basis. Unlimited leave policies in the hourly population could lead to a volatile and unworkable internal labour supply. The more appropriate version of unlimited holiday for hourly workers is an annualised hours style policy, which is often seen in the UK NHS.
This would be where employees are required to work a certain number of hours per year but can have freedom in how they achieve this, within the rules of a flexi-time policy. Such schemes are complex to operate and require a highly sophisticated shift-planning, or a strong HR software system, to make them work. While potentially viable, such schemes are not widely proven and would ideally start with a small pilot scheme to test feasibility.
At least in terms of unlimited leave, the corporate evidence suggests that these schemes are workable when confined to a salaried/overtime-exempt cohort of the workforce. Annualized hours efficiently deployed through an HR software system could be a way of offering a version of unlimited holiday to less senior hourly paid workers and at the same creating more fairness in its distribution.