Every once in a while I come across a posting where a company markets its “Unlimited Time Off” policy. While these are typically younger tech companies focused at attracting top talent, we also see industry heavyweights like GE (senior EEs) and Netflix with such policies.
The message is typically focused on trusting their employees, supporting their lives and families and eliminating the overall hassle of needing to plan around and report on vacation days. This all sounds great in theory, but how do these plans hold up in the realm world?
While I am not against such a policy, it does bother me employees don’t seem to fully understand the pros and cons of such a policy. This lack of understanding may actually disadvantage companies who do not offer unlimited time off to employees. In fact, experts estimate about 2% of companies have an unlimited time off policy. I believe that in general, such a policy works mostly in the favor of the employer and not the employee. Here’s why:
According to Glassdoor, approximately 75% of employees do not use all their eligible vacation days. There are a number of reasons cited, including fear of losing their job, fear of getting behind and no one else at the company being able to do the work. If employees have high anxiety of taking time off when they have clear accrued vacation days (sometimes also hitting a cap), I believe the level of anxiety would be significantly higher in an unlimited time off environment. At least when a worker has accrued vacation days it simplifies the conversation. There are no stats that I have found as to how much vacation employees take in an unlimited time off environment, but I would bet it is no more than in a limited vacation environment, and more likely less.
The biggest misalignment between the US worker and an unlimited time off policy is the fact that there is no accrual of unused time off, and therefore no payout on termination of employment. At a time when employees are anxious about taking time off and only 25% take all their vacation days, it means the majority of employees are losing money from such a policy.
As I said before, I am not blanket against an unlimited time off policy, but I think the market should understand this is primarily an employer and not an employee benefit. These benefits include no accrual of vacation days on the balance sheet (and hence no payout on termination), less administrative overhead of having to track vacation days and potentially attracting better talent with a time off story that sounds great.
There may be one big benefit to employees though. If these policies truly help companies attract better talent, then you may get to work with better people. This perk aside, it’s important for employees to completely grasp the disadvantages of an unlimited time off policy. It might look good at first glance, but keep in mind it’s more profitable to the employer.