On the face of it, unlimited holiday should be a tempting perk to attract great talent, and a way to show your people that you trust them. In reality, however, this is a policy which could see problems outweigh the advantages.
Pros of offering unlimited holiday
Happier employees
We all know that happy employees are more productive. This flexible benefit can boost employee morale and improves workplace culture.
Today, there is more pressure than ever on companies to help employees better manage their work-life balance and personal well-being and unlimited leave is just one way to achieve these. Instead of obliging people to jump through administrative hoops and juggle family and work commitments, they can simply use their judgement and take the time they need.
Higher productivity
Studies consistently show that post-vacation employees show higher performance, meaning unlimited holiday time should increase the quality of the work being done.
Research also suggests employers who offer an unlimited holiday to employees could see a reduction of sick days and staff turnover. An unlimited holiday policy will also promote quality over quantity. Almost overnight you’ll eradicate the clock-watching attitude, and consider an employee’s overall contribution rather than just their presence in the workplace.
Retaining top talent
Generous annual leave benefit is one of the top employee perks. Offering unlimited holiday could be the difference between a top candidate choosing you over a competitor – especially if the salaries on offer are similar. It could also be the USP on your job advert, meaning more candidates view your role over others.
Cons of unlimited annual leave
Without clear expectations – abuse or burnout
Part of the issue is a lack of established norms. Employees don’t want to do the “wrong thing” or face criticism from their teammates. Without standardised policies, every decision becomes personal. Managers may feel uncomfortable refusing holiday requests at inconvenient times – after all, their direct reports have been promised “unlimited” holidays, so placing any limits feels personal.
This may be due to unlimited holiday still being a fairly new idea and people are still in the ‘old’ mindset where they are unsure when and how much holiday to take. Knowing the numerical limits can help define what is acceptable behaviour. While one person might want to take 15 days off in a year, another team member may feel they need 35. This is fine under the policy, but when one person is away, their work still needs to be covered and it’s the person who takes less holiday who picks it up. This can result in burnout for that person and may require the business to employ additional people, thus increasing costs.
But there will always be that one person who will abuse the policy, taking far more days than is needed resulting in lower productivity, but with no repercussions.
Unlimited holidays become even more of an issue for those working remotely. While an employee might be spotted coming into work on Christmas Day and told to take a break, it may not be as easy to spot an overworking remote worker. On top of this, remote workers might decide to work from their holiday destination and not fully switch off. This temptation, combined with a lack of clarity around holiday expectations, can place employees at serious risk of burnout.
Negatively viewed for taking days off
In reality, the issue with unlimited holiday isn’t that people take too much time off – it’s that they take too little. Facing too much choice, employees feel under social pressure to skip the holidays altogether.
Being viewed negatively for taking days off is probably the biggest contributor to employees not taking enough annual leave. People also don’t take all their annual leave due to the amount of work they have to do. This would only increase with an unlimited holiday policy.
Division between higher and lower paid workers
Even if everyone is entitled to unlimited holidays, those with higher salaries are likely to be able to afford more trips. As a result, the higher paid staff are more likely to take advantage of the perk, leaving those on a lower wage to pick up their slack.
You have to be very trusting
Some employers might worry that people would take unfair advantage of this policy. But the only way an unlimited holiday policy works is if you can really trust your people. It’s also true the other way around. This divide needs to be addressed before considering any new holiday policy.
What does UK law say about unlimited unpaid holiday?
The UK has a minimum level of 5.6 weeks’ paid holiday (28 days per year) for a full-time employee under the Working Time Regulations 1998 (WTR).
European case law (pre-Brexit) made it clear that an employee should not be prevented from taking their minimum level of leave and employers should encourage their employees to take their leave.
Two 2018 cases determined by the ECJ (Kreuziger v Land Berlin and Max-Planck-Gesellschaft v Shimizu) went as far as to state that a national rule (for example, the WTR) that provides for an employee to lose their right to accrued holiday at the end of a leave year and not roll it over, may, in fact, be invalid if the employee was prevented from taking it by their employer.
In light of these legal requirements, it is very challenging for employers to have a policy for which UK employees claim they have unlimited holiday. In fact, there is anecdotal evidence that suggests employees do not take anywhere near their statutory minimum level of leave when employers turn holiday from an annual legal entitlement into a ‘nice to have’ benefit.
In practical terms, many businesses may find it challenging to respond positively to requests for long holidays, particularly when they overlap with other employees’ requests. The issue can also extend to business culture, where staff are ‘always on’ and taking lengthy periods of leave is frowned upon.
As a result, particularly prevalent in our current pandemic world, a rising number of employees are suffering from burnout and poor mental health.
Is unlimited annual leave right for your organisation?
Whether you should introduce an unlimited holiday policy into your business should depend on what you want to achieve and what your employees want.
Before you implement any new policy, always gain feedback from key stakeholders and have a trial run to minimise the chance of failure. Also think flexibly and trial how you could adapt an unlimited annual leave policy. For example, to encourage employees to take appropriate breaks, avoid burnout and recharge regularly, consider the following:
- If your business has slow seasons (such as August or December), allow employees to take as many holidays as they want during those times – as long as enough employees are in place at any given time to provide minimal customer support.
- Create a “mental health day” policy – either as part of your sick day policy or as a separate policy. Sanctus, a mental health and wellness start-up, has provided some helpful guidelines, but the essence of their policy is that if you judge that you can’t show up to work because of your mental health, then you can take time off in the same way as you would a sick day.
- Require all employees to take a minimum number of holidays per quarter and per year, with no option to roll them over into the following year.
- Lead from the top – make sure that all managers take their holidays, and stress the importance of work/life balance as part of your working culture. Build discussions about holiday time into your 1:1 conversations – managers should ask their employees questions about when they will be taking their holidays and encourage them to take those days off.
- Consider reducing your employees’ weekly workload, instead of insisting on regular breaks. Many businesses believe that the time has come to try a 4-day work week – but be careful that this doesn’t turn into 40+ hours crammed into 4 days instead of 5.
The idea is sound – knowledge workers benefit from frequent breaks and placing trust in our employees will increase their engagement and motivation levels. But in practice, a more mindful approach to holiday policies can help employees be healthier, happier – and more productive!
Alternatives to unlimited holidays
In light of the legal and practical ramifications summarised above, what could employers do instead of offering unlimited holiday?
Some employers are choosing to turn an unlimited holiday policy into a policy that provides a requisite minimum number of days that the employee is encouraged to take as leave (based on the WTR) and unlimited holiday on top. Such a policy should have clear guidance to ensure it is not abused and performance remains unaffected – some policies link any entitlement to unlimited holidays (in excess of the WTR requirements) according to the individual’s key performance indicators. The policy could also include a right to remove the unlimited holiday (again beyond the statutory minimum cited above) in the event of performance issues.
Some employers are designating days in the week that are free from video calls and others provide time off in lieu.
There is increasing focus on flexible working for all employees, which will only increase this year, and continues to be an important recruitment and retention tool.
Overall, it is clear that the concept of unlimited holiday could be an effective employee engagement tool. However, in practice, any policy needs to be crafted carefully and the starting point is to ensure that an employee is encouraged to take their statutory minimum holiday entitlements under the WTR with any unlimited holiday provided as an additional benefit.
Last updated: 17 July 2022