The news reports that more and more companies are moving to offer unlimited vacation time. On its face, this policy change appears to be a generous offer by employers to boost employee morale and attract top talent, but there may be other factors at play. Here is an overview of such policies and some observations on their utility for California employers.

1. What is an unlimited vacation policy?

An unlimited vacation policy is one in which employees do not accrue vacation time, rather they take vacation as business permits and they are paid for any vacation days they take. Such policies are most common for highly skilled and/or executive level workers.

2. How common are unlimited vacation policies?

An unlimited vacation policy is still the exception, rather than the norm, in corporate America, but there has been a trend in the last few years to adopt more flexible paid time-off policies for some categories of employees, such as certain exempt or white collar employees.

3. What factors are driving American businesses to adopt these policies?

The rules governing vacation time may actually discourage its use. California law, for instance, defines vacation days as a form of wage earned by an employee. As a result, many employees simply accrue their vacation days, which must be paid out as wages if an employee does not take time off from work. An unlimited vacation policy would encourage employees to use their vacation time, rather than bank the time in lieu of a vacation.

4. What are the advantages of unlimited vacation policies?

Employers are able to offer flexibility to their employees and attract highly qualified candidates who may require the flexibility of an unlimited vacation policy. Employers may also benefit from an unlimited vacation policy because employees will be encouraged to use vacation time instead of simply accruing time off, which may result in increased productivity. Employees who take time off—instead of simply accruing vacation time—may be more rested, relaxed, reenergized and, perhaps, more productive. Additionally, a policy that allows for unlimited time off may encourage more efficient use of work time.

5. What are the disadvantages of unlimited vacation policies?

Some of the disadvantages include the fact that employees will have less guidance regarding how much time off is permissible. Moreover, such policies will not be suitable for every type of position. For instance, workers whose jobs require on-site presence, such as those in customer service positions, would not be able to take unlimited vacation and still perform the functions of their jobs.

Key Takeaways

Certain companies or industries may find an unlimited vacation policy beneficial for certain categories of workers. However, such a policy will not be standard in every industry, and some types of jobs will not be amenable to such a policy because of the nature of the job. In the end, the advantage of such a policy will depend on a demonstrated benefit for both employers and employees, such as increases in employee productivity and increased work-life balance for employees.