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More Employers Are Offering Unlimited Vacation

October 12, 2015

 

It sounds like the ultimate example of corporate beneficence: Take as much vacation as you like, as long as you get your work done. And in the right company, with the right culture and the right manager, such "unlimited vacation" policies could be a pretty fabulous perk.

 

Yet they're not being offered purely out of altruism. The obvious benefit to companies is that the promise of such flexibility helps them attract and retain more employees, setting them apart from more traditionally minded, we-don't-trust-you employers.

 

But unlimited vacation policies also have another benefit for employers that gets far less attention: a financial upside. When employers stop doling out a set amount of vacation days, they no longer have to pay out unused days if workers quit or get laid off from the company.

 

"That’s a very large financial advantage to the employer," says Carol Sladek, a partner who leads work-life consulting at Aon Hewitt. "They eliminate that financial liability."

 

While unlimited vacation policies are still rare in Corporate America—just 1 to 2 percent of companies offer the benefit, according to the Society for Human Resource Management (SHRM)—the perk is starting to seep into industries outside Silicon Valley, where it first became popular. Earlier this year, about 30,000 of General Electric's more senior U.S. salaried employees became eligible for its "permissive time off" policy, which doesn't set a limit on the number of days they can take off.

 

And last week, the accounting and consulting firm Grant Thornton touted its switch to a similar approach. "We believe our flex time off policy is the model for the professional services firm of the future,” the firm's chief culture officer said in the announcement.

 

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.

 

There's a lot of money at stake. Research from USTA's Project:Time Off initiative, conducted by the economic analysis firm Oxford Economics, looked at SEC filings for 114 public companies. It found that the average vacation liability per employee is $1,898, and that U.S. companies carried $65.6 billion in accrued paid time-off costs forward on their books last year.

 

Implementing unlimited vacation time is proving to be a challenge for any company adopting such a policy. A few have already reversed course after finding that workers needed better parameters or were actually taking less time off under the anything-goes approach. That's why HR experts stress the importance of giving some kind of guideline about how much time away is expected, and clearly explaining the multiple motivations behind the switch.

 

"The devil here really is in the details of the communication," Sladek says. "It sounds like a great idea, and it's very much a win-win for organizations—as long as people really understand what the benefit is both for the employee and the employer."

 

Adapted from the Washington Post.

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