Unlimited leave – the answer to increasing productivity?

by Cameron Edmond07 Aug 2013

Annual leave is, in most workplaces, regulated. While many organisations have differing policies and methods to handle leave requests dependent on the nature of the work, an ‘honour system’ of unlimited leave is becoming more prominent in US organisations.

Ilya Pozin, founder of digital marketing agency Ciplex, believes that an ‘unlimited vacation days’ policy can establish employee responsibility as it shows them they are trusted. It can also act as a powerful recruiting perk.

Pozin also claimed unlimited leave can increase employee engagement and productivity. “Allowing your employees to take time off when they need it most encourages a more productive work environment,” he wrote. “Instead of working when their minds are elsewhere, they’ll be able to give you their full attention.”

‘Unlimited leave’ is used as a catch-all term for heavily relaxed leave policies, although in practice these still often involve structure to some degree, such as an individual’s leave having to be approved by their team.

Joe Reynolds, co-CEO of event production company Red Frog, described his organisation’s leave policy as requiring their employees to ensure their work is being completed, and that they are covered while away.

However, some organisations are taking it to the extreme, and removing policies on leave entirely. “The best example is our vacation policy. It’s simple and understandable: We don’t have one. We focus on what people get done, not on how many days they worked,” Reed Hastings, CEO of Netflix, stated.

An increase in productivity following the removal of vacation policies was reported by Hubspot, FastCompany found. “One thing we are pretty sure about is that it's a less stressful way to manage [vacation days],” Dharmesh Shah, CTO of Hubspot, said. “Employees take the vacation when they need it and we don't have a spike of vacations at specific points of time.”

In addition, it was reported that allowing employees complete flexibility in their vacation planning resulted in strategic planning based on workload. “When you consider when you can best take a vacation as opposed to when you must, you end up able to take time off without affecting performance,” Michael Mahoney, vice president of consumer marketing at GoHealthInsurance.com, stated.

Mahoney also said GoHealthInsurance.com’s leave policy was a primary factor in why he joined the company.

Research on the benefits of leave – and specifically unlimited leave – is thin, however a 2006 Ernst & Young study uncovered that 10 additional hours of vacation time resulted in an average 8% increase in year-end-performance ratings. Frequent vacationers were also found to be less likely to leave their organisation.

While over half of Australian employees do not take their full annual leave entitlements, one-in-three said their productivity is impacted by not taking all their leave, with two thirds stating their productivity was compromised when they were unable to take their leave when necessary, research from Hays found.

Unlimited leave is not without its drawbacks, however. Sue Shellenbarger, columnist at The Wall Street Journal, argued that unlimited vacations can result in employees taking less time off.

Shellenbarger found that – in the US – many employees are fearful to take even their scheduled time off, worried it will impact their workload, or place them in the crosshairs of the next downsize. As such, placing vacation time completely in their hands causes them to become too fearful of repercussions to take any time off.

Although Australian employers are yet to embrace the concept,  in Tasmania, an employee of Nyrstar, an organisation with an unlimited (but regulated) leave policy, was denied a weekend off due to it not fitting with scheduled production (a condition in the company’s policy). The employee then applied for carer’s leave, providing a medical certificate indicating he would be attending appointments with his injured daughter, Mondaq reported.

However, it was then revealed that the individual had instead spent the weekend at a resort with his family. Fair Work Australia found that, due to gaining leave under false pretences, the employee had undermined the trust-based system in place. The individual’s employment was terminated.

A completely hands-off approach isn’t what Pozin advocates, with his vision of unlimited vacation days still involving some sort of policy, dependent on the functions of the organisation.

 “Start by requiring team approval - not just manager approval … set up a standard amount of advance notice for taking vacation days, a limited number of consecutive weeks of leave, and potentially frozen times of the year where a full staff of employees is crucial,” he suggested.

What do you think of unlimited vacation days? Is the possibility of increased productivity worth it, or do you fear you might be coming into an empty office most days? Let us know in the comments.

COMMENTS

  • by Graeme Creed 7/08/2013 3:12:05 PM

    How do you account for this (accrued leave) and I am guessing there is no unused leave paid on termination.

  • by kevin 7/08/2013 3:15:59 PM

    I have long been an advocate for paying employees for their sick leave by incorporating it into their salary and then if they have time off, it is without pay. Whilst the unions are happy to have a position for purchased annual leave with the employer playing the role of banker, they have major objections to incorporating SL into salary. Again, what has been won can never be traded. Don't hold your breath going forward in Australian.

  • by Helen 7/08/2013 3:27:09 PM

    It is important in considering this initiative to understand whether in the USA context the unlimited vacation leave is actually unpaid leave.

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