Does unlimited annual leave make good HR?

With companies like Virgin, Netflix and LinkedIn offering unlimited annual leave, the debate about whether it is a good HR practice rages on.   

You may think that employees at companies that offer limitless annual leave are rubbing their hands in glee thinking about all the exotic holidays they can take on full pay.But is it really as good as it sounds?

Let’s consider the pros and cons for employers.

Potential pros

The main premise is that by providing employees this freedom and autonomy, you will have a happier and more engaged workforce.

It is argued that it can also increase employees’ productivity by creating a more results- driven workplace culture. Rather than have employees at their desk and clock watching until they can go home, they can make the most of the quiet time to go on leave and work during the busiest times of the year to get the best results.

When employees feel that their employer trusts, this can have a noticeable effect on their performance.

Many companies who offer unlimited holiday also view it as a perk that can prove attractive to prospective employees and help retain key talent.

Potential cons

Business magnate, Sir Richard Branson, blogged that ‘it’s left to the employee alone to decide if and when he or she feels like taking a few hours, a day, a week or a month off, the assumption being that they are only going to do it when they feel a hundred per cent comfortable that they and their team are up to date on every project and that their absence will not in any way damage the business – or, for that matter, their careers!’.

Like he says, this is an assumption. Recent surveys and studies show that there are many employees who do not take their full annual leave allowance. So some high flying employees in fast-paced and high pressured environments may find it actually quite difficult to find the right time to take leave. With projects always on the go and deadlines to be met, there is a risk that they will actually not take holiday and this could result in burnout and stress.

Some employees may be concerned about what management will think about how much time they are taking off, especially if they are promotion opportunities in the pipeline. This can also lead them to not taking enough annual leave despite the unlimited holiday policy in place.

Of course, on the flip side, you may have some people who do take the Mickey. Employers need to take care that the policy is being used with respect and deadlines are being met, clients are happy and service delivery standards are high. Also, it is important to make sure that other employees who have to cover their work are not feeling overburdened.

Not everyone across the business will be eligible for unlimited leave. It suits some jobs but not others. This can result in friction, difficult workplace relations and low staff morale.

Final thoughts

Regular breaks from the workplace can help combat stress, prevent workplace accidents from occurring. They can boost morale and motivation, therefore employers should think about annual leave as not just a legal obligation but something that is of great benefit to your employee’s wellbeing, productivity and performance.

For HR policies to really succeed, the workplace culture has to be able to accommodate them. If you have a policy that lays down that employees have unlimited leave but the management style makes employees feel guilty about taking time off, it is really not going to work.

It is obviously not viable for all employers, but there are other options you could consider, such as allowing employee to buy and sell leave, providing more leave with each year of service (up to a maximum amount) or having a generous allowance that exceeds the statutory minimum.

If you would legal advice on annual leave, get in touch with your Employment Law Adviser.

Director of Legal Services

James Tamm

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