Vacation Time: To Accrue or Not To Accrue?

By May 1st, 2018HR Blog

By Jennifer Jacobus, PHR-CA, SDEA

A good handful of people have sent me articles and information on the concept of an “unlimited vacation” policy, a “non-vacation” policy, or “name your vacation” policy. I get the message, you’re obviously begging for my opinion on the subject!

The concept of an “unlimited” vacation policy is this: the employer does not track the amount of vacation time employees take. Employees can take as much time as they want, it must simply be approved by their managers, and employees need to be caught up with their work. The companies that have implemented this type of policy feel that as adults, their employees should be trusted to manage the time it takes to do their jobs, meaning that employees should be able to get their work done and know when it’s appropriate to take time off. My mind reels with the pros and cons – on one hand, who wouldn’t want unlimited vacation time? But ultimately, the cons outweigh the pros in my mind.

First of all, this type of vacation policy would be much more difficult to implement with non-exempt employees than with exempt employees because of overtime issues. The theory is that employees will work their rear ends off to get their work done so that they can take extended time off – something longer than the traditional 1 to 2 weeks per year. But there are only so many hours in a day and a week that employers can allow non-exempt employees to work (this rule especially applies to California employers). A few articles I read suggest that unlimited vacation policies should only be implemented for exempt employees, but then we come to an issue of fairness. Remember, we’re talking about unlimited vacation time!

What about employees who are granted less time off by one manager than another manager? Again, we’re dealing with a fairness issue (on a side note, I don’t care too much about what’s fair and what’s not, as long as there isn’t any discrimination involved. We live in a society where things aren’t always fair, after all! Hmm, I wonder if there are societies where things are always fair? Interesting…). Employees might try to claim that approval decisions are discriminatory based on a protected class, such as race, ethnicity, sexual orientation, etc.

Some attorneys caution employers considering making this change in their company’s policy that it could be viewed as a way for employers to avoid paying out vacation in a termination case. Their recommendation is to keep from allowing employees more time off than you are willing to pay out.

Other concerns involve paid leave. What if an employee wants to take vacation time concurrently with Family Medical Leave? What about layoffs or RIFs when an employee may count on accrued vacation as a sort of savings account to draw upon?

What about those employees who take advantage of or abuse the policy? Employers still have to track vacation time for documentation purposes for this reason alone, so adding “no documentation” to the “pro” side of the debate is out.

This type of policy also eliminates seniority-based vacation benefits, where an employee’s accrued vacation benefit increases with years of service. In this case, leveling the playing field, so to speak, would be similar to taking a benefit away from some employees.

I thought for sure that most employees would love the concept of unlimited vacation, but surprisingly, the comments I have read on the topic don’t support it. An overwhelming number of comments I read centered around guilt; employees would feel guilty taking more than a couple of days off at a time, thinking it was easier to only take the time off that they had actually accrued. Other comments stated that employees felt companies would turn to hiring “20-somethings,” since they are more likely to refrain from taking any extended time off for fear of losing their jobs.

All this writing, and I still haven’t given my opinion! Bottom line, I think these types of policies definitely have their place – they will work in the right type of industry and work environment with properly-trained managers. This policy is not going to work for smaller offices, where having an employee out for an extended period of time will create hardship for the organization. Managers must be trained to manage towards accountability, and clear goals must be set. If “unlimited” vacation policies are implemented properly, I think companies can see an uptick in productivity, greater employee loyalty, and employees who work harder because they not only feel appreciated, but also because they are being treated like adults.

I think if this vacation policy was on my agenda, I might wait and let other companies make the mistakes before I implemented it in my own company. I’ll ponder this issue further on my next vacation, using my accrued vacation time. 🙂


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