Over the past two years, holiday entitlement has been a highly discussed topic. With many businesses extending or introducing the right to carry over holiday and the pandemic highlighting the importance of employee wellbeing and mental health, people’s outlook on their job has shifted to desiring a more agile approach to working.
A recent Reed survey of 2,000 office-based employees found that nearly half of those not working hybridly are prepared to leave their job to access a role that offers the choice of flexible working.
With this in mind, should businesses consider reassessing their traditional holiday entitlement and instead shift to a more flexible arrangement including unlimited annual leave? And could it be the answer to attracting the best talent in this candidate-driven market?
What is unlimited annual leave?
Unlimited paid leave has been a common perk in the US, specifically in tech firms, as a way to attract and retain employees. IBM began the trend in the 1990s and it continues to increase in popularity with big firms such as Netflix, HubSpot, LinkedIn and Bumble following suit.
The policy allows for employees to have no limit to how many days they take off, allowing them to take as much time off as they feel they need. Businesses that have adopted this benefit have put more of a focus on meeting deadlines and the output of work, rather than workers’ physical presence. Likewise, the policy gives professionals more ownership over their time to allow for a better work-life balance.
How does unlimited annual leave work in practice?
Legally, all UK employers must offer their workers 5.6 weeks or 28 days of paid holiday a year, which is commonly known as statutory leave entitlement. An employer has the choice of including bank holidays as part of this offering, or with more additional leave than the legal requirement, and has the responsibility to ensure that their workers take this statutory entitlement.
Claire Harvey, Managing Director of Reed’s UK network, says “while there are no formal rules in place for offering unlimited annual leave, if a business chooses to offer the benefit, they should think carefully on how to tailor a policy and approach that will work operationally while being mindful of its legal obligations.”
Here are a few practical and legal issues to consider:
Outlining a procedure for requesting leave, competing requests and in a situation where you have to reject an employee’s request
Establishing limits on the maximum number of days that can be taken in one period
Defining how you’ll manage underperformance - with regards to a worker taking too much paid annual leave
Thinking about how maternity, paternity and sick leave might impact the policy and your business
Ensuring your employees take the statutory minimum annual leave entitlement that is required by law, a good way to certify this is by including this in your employment contracts
Offering your senior management training on the policy, to avoid any risks that may occur, such as discrimination, and to ensure employees feel encouraged to take advantage of the perk
Advantages of unlimited annual leave
Positively impacts retention and recruitment
In today’s new working world where professionals are seeking flexibility from their employers, unlimited annual leave is a unique benefit that will attract talent to your business without the extra cost of paying higher salaries.
Equally, introducing a policy that allows for employees to be trusted to manage their own workload and schedule could also help retain existing workers, especially as this benefit is not widely available in the UK.
Encourages a work-life balance and wellbeing
According to the Health & Safety Executive, 21.6 working days were lost due to stress, depression, and anxiety in the UK last year. Since the onset of the pandemic employees are putting more focus on their wellbeing and work-life balance.
By offering unlimited holidays, businesses are promoting the importance of wellbeing in their business and allowing workers the opportunity to not have to worry about juggling holiday entitlement around personal commitments and emergencies that will inevitably arise.
It is commonly known that overworking can lead to illness, stress, or anxiety – which can ultimately impact an employee’s productivity levels. By awarding staff with as much time off when they need it should not only prevent this but encourage better efficiency and output of work.
Disadvantages of unlimited annual leave
Put a strain on colleagues
If this policy isn’t carefully thought out, employees could submit large chunks of leave without considering deadlines or busy periods, placing extra strain on their colleagues who will have to pick up the slack and take on the extra work.
It may not work for all roles and people
In a recent Reed LinkedIn poll, we asked our followers “Do you think an unlimited holiday policy would work for your organisation?”. With 1,798 votes, 43% of people said yes, 43% said no and 14% of respondents said they were unsure.
This result highlights how an unlimited annual leave offering may not work for all industries or roles, but equally many people believe they could use this benefit in their working life. This split could promote a sense of unfairness for professionals in roles where more autonomy wouldn’t be as easy to execute, therefore they wouldn’t be able to get the most out of the policy if implemented business-wide.
It could create anxiety of not knowing the limits
The BBC spoke to Ben Gately, Chief Operating Officer at UK software firm CharlieHR, which was one of the first businesses in the country to roll out the benefit to its workers nine years ago. After years of trialling the benefit, the company concluded that it wasn’t fit for them. Ben said, “People are pretty bad at taking holiday, we're all scared to do it because we have to do our handovers and pass stuff over and meet deadlines and so we actually saw a reduction in the amount of holiday people were taking.”
This research is one example highlighting that an unlimited annual leave policy can leave too much unsaid, resulting in fewer holiday days taken and therefore making the benefit counterproductive.
Could unlimited annual leave work?
While there are both pros and cons to offering employees unlimited annual leave, it is clear that there is not a one-size-fits-all formula for all businesses. Some professionals are happy with setting boundaries and others prefer a more flexible working environment.
Claire adds: “In this current job market, candidates hold the power, so it is important to reassess your attraction and retention methods. Unlimited paid leave is a very enticing benefit for prospects to join your business. However, I recognise it can be a difficult offering to implement and maintain, with its success largely sitting with how well thought out your policy is. If done badly, it can have the opposite effect on the amount of leave taken.”
If you are considering this unique benefit, it is worth engaging with your employees to see if they have the appetite for this fairly radical change before committing to implementing it.
If you’re looking for a talented professional, find your nearest Reed office and speak to one of our specialist recruiters.