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Unlimited Holidays: How it Works, Pros and Cons | Factorial

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4 min read
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Holiday schemes, policies and regulations are a key part of any organisation. A growingly popular example of this is unlimited holidays.

Here is what you need to know about an unlimited holiday system and how to tell whether it’s right for your organisation.

What is an Unlimited Holiday?

Unlimited holiday allowance, also known as unlimited paid time off (PTO), flexible time off, or unlimited annual leave, is a policy where employees are not allocated a specific number of holiday days within a given year. Instead, they have the flexibility to take as much time off as needed – provided they meet their job responsibilities and objectives. This approach trusts employees to manage their work schedules effectively and balance their personal and professional lives.

The concept of unlimited holiday is based on the belief that giving workers more autonomy and free time can lead to increased job satisfaction, reduced burnout, and improved work-life balance. It is seen as a departure from traditional leave structures that specify a fixed number of employee days off each year.

Paid vs. Unpaid Unlimited Holidays

Paid and unpaid unlimited holidays are two variations under the complete holiday policy in terms of compensation when employees take off. How does a company choose between the two? It often depends on the company’s values, financial considerations, and the overall objectives of implementing such a policy. Many organisations that adopt an unlimited holiday policy lean towards the paid model to ensure employees feel supported in maintaining a healthy work-life balance without facing financial repercussions.

Unlimited Paid Holiday

Employees continue to receive their regular salary or wages for paid holidays while taking time off under the unlimited holiday policy. The idea is to provide flexibility without penalising employees financially for taking the time they need for personal reasons, holidays, or other non-work-related activities. Consequently, the employer maintains the trust that employees will manage their time responsibly, contributing to a positive work culture.

Unlimited Unpaid Holiday

In contrast, unpaid unlimited holidays mean employees are not paid for the time they take off. While they can take as much time as needed, they do so without receiving their regular salary during those periods. This model may be less common, as it could create financial strain for employees or incentivise them to take fewer holidays, and it may not align to improve work-life balance without sacrificing compensation.

What is Statutory Holiday Entitlement?

Full-time employees in the UK are entitled to a minimum of 28 days of paid leave per year. This includes the standard 20 days of annual leave and the eight recognised public or bank holidays. Employers may include public holidays as part of the 28-day entitlement or provide them separately. Part-time employees are entitled to the same proportion of leave on a pro-rata basis.

Pros of Unlimited Leave

The success of an unlimited leave policy depends on effective communication, a culture of trust, and clear guidelines to ensure that both employees and employers benefit from the flexibility it offers. If all of that is present, implementing an unlimited leave policy will likely offer various advantages for employees and employers. Here are some of the pros of unlimited leave:

  • Enhanced work-life balance.
  • Increased job satisfaction.
  • Improved mental health.
  • Attraction and retention of talent.
  • Increased productivity and engagement.
  • Simplified administration.
  • Customisation for individual needs.

Cons of Unlimited Holidays

While potential drawbacks exist when offering unlimited holiday, they are not universal, and many organisations have successfully implemented unlimited leave policies by implementing safeguards and actionable steps that either mitigate or prevent such pitfalls so that you can ultimately safeguard employee health. Here are some cons to look out for:

  • Potential for abuse.
  • Lack of clear boundaries.
  • Difficulty in tracking.
  • Impact on company operations.
  • Potential for burnout.
  • Not suitable for every industry.
  • Cultural shift challenges.

Case Studies

There are many companies that have documented and reported on their switch to an unlimited holiday policy. For example, UPD, a Dutch consulting company, implemented an unlimited holiday policy in 2018 to enhance work-life balance and attract top talent. The organisation aimed to give employees more time for personal and professional development, fostering equality and a trusting culture.

The policy allows employees to independently determine their ideal work-life balance, with a minimum of 20 days off per year. The change required a paradigm shift and coaching sessions to align the leadership team and address concerns about potential abuse. The successful implementation increased employee satisfaction, providing them the flexibility to take the time off they need.

Another successful company, Kronos, introduced an unlimited holiday programme in the US and Canada in 2016, aiming to enhance its workplace culture, attract and retain talent, and deliver better results. The programme required significant education for managers and employees on negotiating time off.

Despite initial concerns about potential abuse, the average usage increased by only 2.65 days per year. Trust in employees and a focus on results over face time were critical drivers for the programme’s success, impacting engagement positively and leading to a drop in voluntary turnover from 6.4% to 5.6%.

Creating an Unlimited Leave Policy

Here are a few tips for offering unlimited holidays and building your own policy:

  • Leave Stipend System: Execute a leave stipend system where employees receive a specific budget of paid leave days annually, which can be negotiated based on individual needs.
  • Rotational Leave Mandate: Institute a rotational leave mandate for all employees, ensuring each team member can send holiday requests and take at least two weeks off consecutively at least once a year.
  • Leave Utilisation Metrics: This system tracks not just the number of days taken but also the purpose of each leave, helping you identify trends, understand employee needs, and create a strategic leave architecture.
  • Collaborative Leave Planning Sessions: Introduce mandatory collaborative leave planning sessions between employees and their managers at the start of each quarter, where you can set expectations, align leave plans with project timelines, and establish contingency measures.
  • Creating Feedback Loops: Make room for a real-time feedback mechanism so employees can express concerns or suggestions regarding the unlimited leave policy. This means regular pulse surveys, open forums, or dedicated communication channels.
  • Leave Impact Simulation Training: Provide specialised training for managers through leave impact simulation sessions. You can use scenarios and simulations to equip managers with the skills to manage workloads effectively during team members’ absences, minimising disruptions.

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Sergio is a seasoned copy and content writer who has worked directly with company founders, CMOs, brand executives, and marketing directors from multiple industries. He's an HR geek and humble terpsichorean.

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