Why Unlimited Holiday Is Not A Good Employee Benefit

Unlimited holiday is one of the coolest employee perks around. That is apparently, until you’ve actually experienced it.

In the world of startups, it’s a benefit we see fairly regularly and it’s also one of the most interesting.

When we’re discussing a startup with a potential candidate who’s never worked for a company with an unlimited holiday policy, it’s usually met with amazement, excitement and disbelief.

With all the possibilities unlimited holiday brings to mind, you’d think it would then be a deal breaker for those already accustomed it.

The thing is though, it really isn’t.

In fact, it’s rarely mentioned.

When a candidate already has experience working for a company with an unlimited holiday policy their response is usually nonchalant.

It’s not because it’s become their new normal but because more often than not, it really wasn’t a benefit at all.

If you’re a Founder considering implementing unlimited holiday at your startup, here’s what you need to be aware of.

Two types of unlimited holiday

The first is paid – this is what we’re discussing. It’s giving your employees the ability to take an unlimited number of days holiday per year with full pay.

The second is unpaid which just means allowing employees to take an unlimited number of unpaid days holiday per year. This isn’t the real deal and not what we’re discussing here.

How unlimited holiday as a benefit works

We're not employment lawyers but we've never seen a UK employment contract which includes an unlimited holiday allowance – there are just too many variables.

Instead, the employee is usually given a specific number of days holiday in their employment contract but these are just not counted by the employer.

The employee can then book holiday in accordance with the standard approval process but the days are never counted.

Great intentions

I’m sure most companies offering unlimited holiday to their employees do so with the very best of intentions and the list is almost endless.

These intentions are often centred around treating adults like adults, empowering employees to manage their own time and productivity, focusing on output rather than input, bringing work and life together rather than trying to find a balance etc.

Not so great intentions

At this point, unlimited holiday sounds like an excellent employee benefit. But not every intention is so genuine.

Many companies report the average number of holiday days taken per employee actually decrease when an unlimited holiday policy is implemented.

If your focus was on reducing the number of days each employee takes as holiday, an unlimited holiday policy would be a good place to start.

The big question then becomes why. Why would the number of days taken reduce and then why isn’t it a great benefit?

Uncertainty

This is the primary reason startups and corporates see the number of holiday days taken fall after they’ve implemented an unlimited holiday policy – no one knows how many days is really acceptable.

If there’s no guidance, every holiday request is uncertain.

Employees don’t know if they’re taking too much holiday, they don’t know how many days in succession is too many, how often should they take holiday.

This, coupled with the fact that no one wants to be the person taking more holiday than anyone else, leads employees to book less holiday overall.

If you’re a manager concerned with team productivity, this isn’t a good thing. People need time away from work to rest and recover to operate efficiently in their role.

It doesn’t reward top performers

We all know the best managers spend more time improving their top performers than trying to get their underperformers up to par.

Unlimited holiday is supposed to mirror this, giving top performers the opportunity to take as much time as they need to continually operate at peak performance.

The problem is that in practice, the opposite happens.

By nature, top performers are ultra-committed to the company and their roles.

Under a standard holiday policy, they’re the ones being reminded to use their holiday before the end of the year.

Conversely, underperforming employees don’t have the same problem. They’re more likely to use their full allowance and thus will benefit more from having an unlimited number of days to use.

Unlimited holiday breeds resentment

This is a big one – unlimited holiday can actually breed resentment and kill that positive culture you’re trying to create.

With no one counting days, employees start taking their own mental notes.

Have others in their team taken more holiday than they have? Is someone on holiday more regularly? Does someone else seem to go on longer holidays fairly often?

It goes further too. Your top performers may feel they really need a break but can’t take one because they’re now really carrying the team which are away more often enjoying the benefits of unlimited holiday.

It’s not really fair

Fair is an interesting word, often wrongly defined as equal.

Is it fair that a new junior level employee working a fairly standard 9-5 with little real responsibility should have equal holiday to someone on the senior leadership team who’s day never really ends and is responsible for the company’s long term success?

We don’t think so.

However, with unlimited holiday your junior employee could take as much or more holiday and that’s not really fair at all.

It’s never really unlimited

Try using your unlimited holiday to book that 3-month trip around South East Asia you’ve been dreaming of.

Maybe try booking off one in every four weeks because you can, you have unlimited holiday, right?

Wrong. Never going to happen.

This is where employees become frustrated – unlimited isn’t really unlimited. There’s always going to be rules and limitations in which case, it isn’t ever really unlimited anyway?

So what’s the solution?

Unlimited holiday can be a great benefit, if executed well.

I’m glad to say the startups we work with which have an unlimited holiday policy have taken great care to make sure it’s effective.

Still, perhaps theres a more elegant solution.

Why not ‘Fair Holiday Allowance’

Perhaps the idea of fair holiday would be better – a guideline number of days based on your role or seniority.

There could be a minimum number of holiday days which must be taken to ensure employees get the rest they need.

There could be an upper limit too, or you could just allow good judgment by your employees providing they follow your holiday approval process.

Perhaps you only count real holiday days, those days taken in succession where the employee is actually resting & recovering.

We’ve all used holiday days for things we really don’t want to do or which really aren’t relaxing; flat inspections, bank appointments, moving house. Maybe those one off days aren’t deducted.

The reality

The reality is any holiday policy, unlimited or not, has it’s challenges and is open to abuse.

The real solution is to build a positive team of great people all committed to your company’s mission, bound together by a shared sense of trust.

When you achieve that, the question about why, if and how you implement your holiday policy won’t even be a question at all.

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