How to Create and Manage an Unlimited Vacation Policy

The main idea of an unlimited vacation policy, sometimes called a “personalized,” “discretionary,” or “open” vacation policy, is that employees can take an unlimited number of vacation days as long as they continue to perform their roles and deliver results. Whether they take five days off or 15, employees are largely in the driver’s seat, and more and more companies are finding that giving employees autonomy over their time-off planning not only helps with recruitment and retention, but it also supports the overall alignment of employee performance with corporate objectives. 

At the outset, unlimited vacation policies were mainly implemented by smaller, niche companies. Lately, larger and more well-known organizations have implemented such policies across their workforces. For example, in 2015, General Electric first implemented an unlimited vacation policy that affected 30,000 employees, or 43 percent of its workforce.”

No matter your organization’s size, industry, or stage of growth, offering the workforce unlimited vacation days may make sense. Here are some ideas to help you get started with creating and managing an unlimited vacation policy in your organization.

Pros and Cons of an Unlimited Vacation Policy

Pros

Offering unlimited paid time off (PTO) doesn’t just benefit employees. It can also make great business sense and help improve both productivity and efficiency. Some of the advantages of an unlimited vacation policy include:

• Shifts focus to performance: An unlimited vacation policy creates a healthy balance between time taken off and time spent being productive.

• Supports work-life balance: Employees feel empowered to create a work-life balance, which also helps them perform better.

• Attracts talent: Employers can use the benefit as a powerful recruiting and retention tool.

• Saves on costs: Because employees don’t accrue vacation time under an unlimited vacation policy, there is no payout for unused accrued vacation time when employees leave.

Cons

When you’re considering implementing an unlimited vacation policy, there are some obstacles to anticipate and address. After all, shifting from a traditional PTO policy to one under which employees have more freedom and flexibility comes with its challenges. Some of the key hurdles you may need to overcome include:

• Tracking time off: It can be challenging to figure out the most effective way to track time off.

• Determining how much is too much: Unlimited vacation can be ambiguous and cause employees to feel uneasy about taking “too much” vacation. (Interesting finding: One study found that in companies that implemented an unlimited vacation policy, employees actually took less time off than before the policy was implemented.)

• Determining what is considered policy abuse: Some employees may try to abuse the benefit and allow their time off to negatively impact their performance.

• “Letting go”: Some managers may struggle with giving employees more autonomy over their vacation time.

Tips for Creating and Managing an Unlimited Vacation Policy

Effectively creating and managing an unlimited PTO policy, or open vacation policy, requires thoughtful planning and communication. As with all talent management policies, individuals need guidelines to explain which actions are acceptable and encouraged, and which are discouraged. Here are some ideas to keep in mind as you craft your own policy:

Communicate a Clear Plan 

Employees should understand why the company is implementing an unlimited vacation policy, how it should be used, and how the policy will impact them in the short term and long term. A comprehensive unlimited vacation policy should not only spell out the policy parameters, eligibility, and instructions for requesting and approving time off, but it should also answer anticipated questions and provide suggestions for how to have conversations around time off. For example, one company created an FAQ document along with its policy for unlimited time off so that employees have clarity regarding how to make requests and what to do when they’re uncertain about the reasonableness of a request.

The key elements of a thorough unlimited vacation policy should include:

• Time-off request procedure

• How previously accrued time off is handled

• How unlimited vacation time works in conjunction with other time-off policies (for example, disability and jury duty)

• Guidelines for the duration of individual time-off requests 

• Process for investigating suspected abuse of the policy

• Where to go for year-to-date time-off reporting 

Continue to Measure Performance

Regardless of whether employees are taking two weeks of vacation or more than that, it’s important to keep the focus on performance and results. Just as individuals and teams need to meet performance targets under a traditional PTO policy, they must do the same when unlimited vacation is an option. Although it’s true that employees will have more control over the amount of vacation time they take off, they must still be accountable to their fellow employees and do their part when it comes to team projects and responsibilities. Some good ways to keep the focus on performance under an unlimited vacation policy include:

• Keeping performance reviews and check-ins focused on results

• Offering employees ideas for how to communicate with teammates before a planned vacation

• Training managers on how to guide employee performance discussions while also taking a healthy approach to time-off requests

Use the Right Technology

Even if employee time off is unlimited, that doesn’t mean it shouldn’t be tracked and managed effectively. Future-dated time-off requests need to be stored and accessed by employees and their managers, and there should also be an easy way for employees to make adjustments to requests, and for managers to approve those requests. Modern org chart technology can not only track time off, but it can also integrate with company calendar and HRIS platforms, making it easier for team members to know when others are out of the office and for managers to better plan for absences. Using time-off technology ensures you have a system of record for your unlimited vacation plan, and it also helps reduce email requests, which are harder to track and can easily get lost in the shuffle.

Ensure Consistency

Not all leaders will immediately warm to the idea of unlimited vacation, so it will be important for HR to advise them accordingly. Moreover, it’s necessary to ensure there are no pockets in the company where employees are free to use the policy and other areas where they feel prohibited or discouraged from taking time off. Managers will need to consistently follow company guidelines for considering and approving time-off requests, and they should also regularly take time off themselves, so as not to create the impression that certain employees are “exempt” from the unlimited vacation policy.

Unlimited Vacation Policy Example

Conclusion

Creating and managing an unlimited vacation policy requires careful consideration and planning. Once implemented, it can be a low-cost way to engage and retain employees while also providing them with a work-life balance that can help them excel as employees. Using these practical tips and our example to guide you, you can be well on your way toward implementing an unlimited vacation policy that your employees and managers will love.