Unlimited Vacations. Too much of a good thing?

At first glance it sounds like the coolest thing ever -- you’re going to work for a company that offers an unlimited paid vacation policy. That’s right, unlimited, as in, take whatever time you need. This is catching on in Silicon Valley, especially among smaller, younger companies. My current employer, a 500-person software company, offers unlimited vacation, as did my previous employer, another internet company of about the same size. Even some big Fortune 500 companies are offering unlimited vacation, although usually only for top executives.


"It's a growing trend," says Carol Sladek, Work-Life Consulting Lead at Aon Hewitt, a benefits consulting firm. "I get questions about this on a weekly basis, if not daily. There's a lot of interest in it."

Do Employees Want Unlimited Vacations?

But here’s the thing: Some people who work in companies with unlimited vacation policies say it’s not always as great as you’d think. In fact, when Aon Hewitt does focus groups at companies that are considering switching to an unlimited vacation policy, they often encounter opposition.

“We get a very mixed reaction,” Sladek says. “Some people feel as if that accrual of time is what allows them to take time off. Without it, they feel less comfortable taking time off.”

Indeed, one complaint is that some people end up taking less vacation than they otherwise would. That's particularly true of boomers and older workers who are used to calculating days off based on days worked.

Millennials, meanwhile, have no such inhibitions, so they zip off to Burning Man, take a few weeks to go backpacking in Thailand, and jet down to Cabo for a long weekend of partying with their college pals.

Unlimited vacation. A good...

Meanwhile the old folks stay in the office and hold down the fort.


You see how a policy that started out sounding so awesome can instead start breeding resentment?

Others will tell you the whole thing is just a bunch of PR and hogwash. One engineer in Silicon Valley recalls working a company where the official company policy was unlimited, but his manager's policy was that engineers could could take three weeks off, and only when the boss said so.

...or a bad thing tying you to work

How Unlimited Vacations Save Companies Money


But the biggest downside is that when you leave your company, voluntarily or involuntarily, you don't get paid for any vacation time you've accrued.

That's bad for you, but great for the company, which leads to the likely real reason that some companies do this in the first place. It turns out that when a company has a traditional vacation plan, accounting rules require the company to keep track of how many vacation days each employee has accrued, and to set aside a cash reserve to cover that liability.

That cash reserve can add up to a substantial sum of money. But guess what? Switch to unlimited vacation, and voila! -- that requirement goes away.

In fact, some companies that adopt unlimited vacation policies do so precisely because they are struggling financially and looking for ways to "get some dollars off the books," says Sladek at Aon Hewitt. The company also saves money by not having to pay someone to keep track of every employee’s accrued vacation days.

How did this get started? Some trace it back to Netflix, which famously created a “culture code” aimed at giving employees more freedom, which included an unlimited vacation policy. Netflix became a model for other companies in tech, including my employer -- Cambridge, Mass.-based software maker HubSpot -- which was inspired to create its own “culture code."

The Other Upside to Unlimited Vacation

HubSpot’s co-founder, Dharmesh Shah, argues that an unlimited vacation policy actually *boosts* productivity, if only because employees aren’t “spending valuable time and energy micromanaging their vacation time to fit an archaic policy," as he wrote in the New York Times recently.

As for that stuff about employees not feeling able to take time off? Evernote, a tech company in Redwood, City, Calif., has come up with a pretty cool solution. The company has an unlimited vacation policy, and also gives every employee a $1,000 bonus to take a vacation. Company spokesperson Ronda Scott says that when she joined Evernote a year ago, “I was worried that no one would take vacation,” but that “over my first six weeks, the entire marketing team rotated through two-week vacations. I was pretty happy to see that.”

Atlantic Media, which publishes magazines like The Atlantic and websites like the Quartz business blog, switched to an unlimited vacation policy at the beginning of this year, and “managers are continuing to pay close attention to employees’ vacation time and to encourage vacation if it’s not otherwise being taken,” says Katherine Cusani-Visconti, SVP of Talent & Culture at the company.

Perhaps the biggest appeal of an unlimited vacation policy, from a company’s perspective, is that it can be a powerful recruiting tool. “Being able to say, `Just take what you need,’ that’s absolutely a big plus, for millennials in particular,” Sladek says. “Young people coming into the workforce don’t see the need for the same kind of structure in the workplace that their boomer counterparts are used to.”

For now the number of companies offering unlimited vacation remains relatively small, Sladek says, though she believes it will continue to catch on.

And why not? If you’re running a company, here’s a policy that saves you money *and* makes you look like a hero.

My sense is that this all part of a larger reinvention of corporate culture, the same one that has brought us flexible hours and the ability to work from home, not to mention offices decorated in bright basic colors, like Montessori preschools, with ping pong tables, free food, and refrigerators stocked with beer.

Like everything else, work is changing. A decade from now, the idea of figuring out how many vacation days you’ve “earned” each month might be as obsolete as dial telephones, VCRs and other relics of the 20th century. Whether that's a good thing remains to be seen.

Dan Lyons is a marketing fellow at HubSpot, a software company in Cambridge, Mass. Previously he was Technology Editor at Newsweek, and a technology columnist at Forbes. He is also the creator of the "Fake Steve Jobs" blog.

Read More

Are all these little companies really worth $1 billion?

YouTube says long videos sometimes work better

Can Apple escape the whirlwind of disruption?

How to handle a PR nightmare: Break all the crisis PR rules

Loading...
See all articles from Small Business Advisor

Friend's Activity