Radhika Panjwani is a former journalist from Toronto and a blogger.

On paper, unlimited vacation can help attract and retain high-calibre talent, but experts point out the problem lies in its muddled implementation and interpretation, and some even say it’s a gimmick.

“For companies, the unlimited PTO [paid time off] policy comes with perks,” writes Branka Vuleta, founder of LegalJobs.io in a blog. “It’s a cost-saving solution, as companies aren’t obliged to pay their employees for their unused vacation days. Furthermore, they’re less liable since they don’t have to track it and abide by the same rules as companies with a limited vacation policy.”

Full-time employees typically receive a minimum of two weeks of paid vacation in Canada, which can seem meagre compared to the unlimited vacation perks enjoyed by employees of EllisDon, RL Solutions, Netflix, Evernote, LinkedIn, GitHub, Kronos and others.

However, there is a lot of ambiguity around the policy. For instance, just how much of unlimited PTO is considered acceptable? How will the vacationing employee’s job be covered? Who will fill-in? How do you ensure it doesn’t impact team dynamics?

In some companies that celebrate their “always on” culture and pay scant attention to work-life balance, unlimited vacation may come with an understanding that employees will be expected to work – in some capacity – while on vacation.

Pretty Girl on Holiday

In a LinkedIn article headlined “Why we ditched our unlimited vacation policy,” Robert Sweeney, chief executive officer of Facet, a marketplace for hiring top tech talent, calls the perk a “scam.”

“Vacation is not really unlimited,” Mr. Sweeney writes. “If you take too much time off, you will get fired. The problem is you have no idea how much vacation is too much, so most people play it safe and take less time off.”

Namely, an HR software company, published a study in 2017 that showed employees with unlimited vacation plans take an average of 13 days off, compared to a traditional plan average of 15 days.

What usually happens is that while human resources won’t keep a tally, employees may be expected to input the days into a calendar.

Each year, the U.S. Travel Association publishes the results of its annual study on time off and vacation usage. The report shows Americans wasted 658 million vacation days in 2016. And by 2019, more than 768 million vacation days remained unused with more than half of Americans finishing the fiscal year with a generous number of unused vacation days.

One policy, many interpretations

When he was at Netflix (which has unrestricted PTO), Mr. Sweeney once told his manager he would be away for three days in January, but his supervisor declined his request because the company was launching in an international market, even though Mr. Sweeney was not in any way involved. He needed the time off because he had been working 90 hours a week for several months on a different project and was burned out. He said he felt “helpless and guilty” for asking.

“This is exactly what happens when you have no defined vacation policy,” Mr. Sweeney writes on LinkedIn. “Instead of a no vacation policy, you end up with hundreds of different vacation policies, one for every manager, and none of them openly communicated.”

After eight years of having an unlimited vacation policy, in 2020, Facet rolled back the perk and introduced a formal vacation policy offering all employees a minimum of five weeks (25 days) of PTO every year. As eight of the 25 days are company holidays, employees can take the remaining 17 days at their discretion.

A productivity magnet

Jiayi Bao, in a Wharton doctoral candidate’s dissertation, (How) Do Risky Perks Benefit Firms? The Case of Unlimited Vacation, examined the effects of the unlimited vacation policy, and found the plan only works when team members are tight-knit and feel they’re heard by their manager.

Ms. Bao’s findings, however, include an interesting detail; she found when a typical unlimited vacation contract was bundled with stipulations such as a performance requirement, it was three times more attractive to high performers. It increased worker productivity by 51 per cent, with 20-30 per cent coming directly from the vacation feature.

“If this unlimited [vacation] policy can change the culture of always working to believing it is okay to be away, that may be the key to success here,” notes Iwan Barankay, a Wharton management professor. “But how to bring about a change in the norms – that is always the big challenge to a company.”

Source : The Globe and Mail

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