What An Unlimited Vacation Policy Really Means

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VACATION: the number of days or hours per year for which an employer agrees to pay workers while they are not working.

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We must begin there, because that's the vacation we're really talking about.

So I'm asking you to purge whatever feelings you've ascribed to "vacation." You know that endless beach that appears in your mind's eye? Turn it upside down and shake it like you would an Etch a Sketch. And that genuine feeling of serenity washing over you? Breathe it on out.

The idea of an unlimited vacation is one that takes the visions and feelings we've built up around vacations [cue Clark Griswold in National Lampoon's Vacation]:

...and knows what our first instinct will be... Yes, please!

But its name is one part "endless buffet" and one part PATRIOT ACT. You know how the former typically goes; you pay more because your stomach is growling and your first instinct causes you to believe that endless eating sounds... Yes, please!  But then you eat what you usually eat, you're stuffed, and that's enough. You just paid 30% more to eat 0% more. And the latter is the kind of political poetics that applies the pressure of language to influence your decision: What do you mean you're against the PATRIOT ACT? What kind of American are you?

What do you mean you're against an unlimited vacation? What kind of employee are you?

Consider This: Our modern idea of vacation—as a period of time away from work that emphasizes the virtue of leisure—has its roots in the middle of the 19th century, when people began to believe that businessmen were suffering from "brain fatigue." See NPR's The History Of The Vacation Examined at the end of this article.

Unlimited vacation isn't policy, it's a workplace culture flag

It goes by a variety of names—unlimited PTO, flexible vacation, and permissive time off, among others—but from a policy standpoint it doesn't carry the same across-the-board standards as something like "6-weeks paid vacation." When I put out a request on HARO to get opinions for this piece, I actually had two employees at the same company (which has an unlimited vacation policy) offer different definitions of what it meant to them.

This brought me to the conclusion that unlimited vacation doesn't mean anything, until it does. If a company embraces it, they are not embracing an agreed upon policy so much as they are waving their workplace culture flag. Companies touting their unlimited vacation policy are telling employees: We're a progressive company to work for. Join us. 

Here are a few tenets this flag has come to stand for:

   -employees know how much time off they require in order to maintain productivity

   -vacation time should not be dictated by seniority or other standards of hierarchy

   -time off work is rejuvenating and therefore leads to happier employees

   -the company values what you get done, not how long you've been clocked in

While such companies typically are progressive (they allow employees to work remotely either part or full-time, they pay fair wages, etc.), Megan McArdle, a columnist at Bloomberg View, offers this perspective:

But how much of a perk is this, really? There’s a reason that you tend to see this perk at places like Netflix, rather than places like Wal-Mart: they’re staffed with workaholics who probably don’t take much of their vacation anyway."

McArdle backs this point up with what she refers to as "superjobs," those kinds of jobs offered by companies (like Netflix) that tend to provide a host of other intangible benefits. But, a "superjob" requires what I'll call a "superworker," and she offers this description for such employees:

The people who do these jobs have a very high level of commitment to their work, partly because the people who do them tend to be hard-working, and partly because being a successful professional is such a deep part of their personal identity and ethos."

While McArdle's argument reeks of some kind of cultural bias—I've seen Wal-Mart employees who are every bit the workaholic, and whose identity and ethos are every bit as propelled by being a successful professional—I see where she's headed. Teasing the thread further, it becomes clear that (similar to the endless buffet) there's more to unlimited vacation than simply the magnificent altruism of the company offering it.

The financial upswing

Attracting great employees is certainly a financial benefit to the company, but the financial upswing for waving the unlimited vacation flag goes far deeper. For starters, there is the aforementioned "superjobs" culture whereby employees tend to take less time off anyways (Kickstarter got rid of its unlimited vacation policy because of this). However, a major benefit is that companies no longer have to pay out unused days. Jena McGregor over at The Washington Post put it this way:

Under a traditional vacation policy, employees either accrue vacation time over the course of the year, or start off the year with a bank of days that are owed to them. If they leave the company before they have used up all the time they accrued, employees are typically paid out their unused time. Not so at companies with unlimited vacation policies—they no longer have to carry any liability on their books for what goes unused."

What does that liability look in dollars and cents? In a report from Project: Time Off titled, The Hidden Costs of Unused Leave, Oxford Economics found that the average vacation liability per U.S. worker is about $1900. This means companies are strapped with 224 billion in vacation liabilities that they will have to pay out to employees when they retire or leave the company. However, the most startling statistic in the report is this: that vacation liability figure grew by 65 billion just in the last year.

In essence, modern employees (referred to in the report as "work martyrs" for their willingness to not use vacation days) under these traditional vacation policies are significantly costing the company by not taking their vacation days.

That's not a bill companies will have to pay out anytime soon, but it's so terrifying a prospect, according to the report, that it's leading many U.S. companies to actively encourage (and even incentivize) employees to take their vacation. This can come in the form of switching to a "use it or lose it" policy where unused days do not accrue (which is what about 25% of U.S. companies already do). Or, I'd argue, it can cause companies to abandon the increasingly expensive status quo and join the cool kids by pivoting toward some form of unlimited vacation.

When it works, and why

John Rampton, Founder and CEO of Due.com, told me that his employees love their unlimited vacation policy. And he does, too. He's had a 40% drop in employees leaving his team since offering the policy. The policy isn't just a flag for John and his team, it's actually become a policy that's working:

We’ve found that employees do take advantage of this and on average spend 21 days of vacation each year. Though they take more vacation days, on average they check their emails 3x a day in comparison to the 1x a day we had while we had a 2 week policy."

While critics of unlimited vacation would likely circle as hawks around that "3x a day" comment, as someone who has worked remotely for over 6 years I see it as a positive. While going unplugged and away from work is certainly important, I've also found value in the middle way—those occasional days of checking email but not being (or feeling pressured to be) either fully connected or disconnected from work.

In an article for Fast Company titled, We Offered Unlimited Vacation For One Year. Here's What We Learned., Nathan Christensen, CEO of Mammoth, shared a story similar to Rampton's. While his team took roughly the same amount of vacation time (21 days) as when they had a more traditional policy, after one year his employees ranked the unlimited vacation policy just below health insurance and their 401(k) in terms of employee benefits (beating out vision/dental insurance, and support for professional development). In trying to uncover why, Christensen said:

The answer may be that unlimited vacation is at least as valuable for what it says as for what it does."

From there, he posits "three hidden messages of unlimited vacation." And all three have little to do with actual policy, and a whole lot to do with the workplace culture:

1. "...offering unlimited vacation communicates that a company views its staff holistically."

2. "...unlimited vacation policies convey trust."

3. "...unlimited vacation treats employees as individuals."

I heard this "it works" mantra from countless other professionals and from a variety of different angles.

For Christopher Searles and his team at Searles Media, an unlimited vacation policy, "eliminates the stress and the overhead on both the company and the employee's part in tracking exactly how much time has been accrued and taken."

For Danielle Thompson and her team at ConsumerAffairs, an unlimited vacation policy "alleviates any fear generally associated with calling in sick or taking a vacation in a time period that would be considered probationary by most companies" while it "allows for employees to self regulate and show their company they are prudent time managers who take a highly organized approach to achieving their business goals."

Unlimited vacation is here, and here to stay

For important reasons both financial and cultural, what we're now referring to as "unlimited vacation" is here to stay. It may take on a name that better reflects what it actually is, but with companies increasingly feeling the burden of employees who won't take their vacation days, and employees increasingly wanting to work for progressive companies who view them holistically—the concept is just getting started.

For those who still prefer their 6-week vacation over what's to come, it's time to turn that preference upside down and shake it clean.

Do you like the direction vacation policies are headed? Is there a facet to the unlimited vacation conversation that wasn't covered here? Let us know in the comment section.

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About the featured photo:

Steve Barton's “Living in Paradise” is our feature painting this week. He is a world renowned artist known for his distinct loose impressionistic style. For decades Steve has been painting works from tropical scenes to still life and has been noted for his ability to capture his subjects in a distinct way through color and technique. For more information, check out Barton Studios.

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