I’m now on my second company that offers a policy of ‘unlimited vacation time’. As an outsider coming from a company with a rigid time off policy and time card system, this sounds very alluring. But, does it actually work?

This HR policy is becoming very popular in the tech industry, especially in startup environments. The stated purpose is to demonstrate trust between employees and employers. People don’t like the notion of their time being tracked closely and appreciate the freedom of being able to take time off when they need it, balancing work and life how they see fit.

In my experience this policy is actually anti-employee. All the benefits are on the employer side of the table.

Here are some reasons why:

There is never a good time to take off, especially in a startup environment

Most companies rolling out this policy are tech startups. One thing all startups have in common are intense deadlines and time pressure. In my experience working at startups, there is always some critical milestone, customer demo, etc. happening each week. We’re always understaffed, and the dev team is frequently on the critical path.

In this environment it’s tough to take time off. At least when you’ve accrued your time off, you have the sense of earning it and don’t feel as bad about leaving. In fact most companies have a policy where you lose the time off if you don’t use it each year. This encourages employees to take a break from the office and prevents burnout.

When vacation isn’t mandatory it can create a sort of ‘hero’ culture. You will get employees who are so dedicated to the company that they take no time off. Should this person get rewarded over the guy sitting next to him who takes 4 weeks off throughout the year to spend time with their kids? I guarantee your leadership team will choose the more ‘dedicated’ employee for that bigger bonus or promotion opportunity.

Managers don’t know where to draw the line.

The unlimited time off policy is a pain in the neck for management to implement. All of these policies have ‘fine print’ associated with them. They usually say all time off needs to be approved by your manager, or some C level person needs to approve over a certain # of weeks.

As a manager I’ve found that there’s this time off gray zone between 3-5 weeks off. The unlimited time off policy seems to imply that it’s OK if people need to take more time than the average. Is it OK, or should I be concerned that someone is taking advantage of the system?

In fact, I’ve been questioned about employees taking too much time off with this policy. It’s seems that some companies are more interested in the marketing of the policy vs. the actual benefits of it.

Little incentive to stick around the company

This policy is stripping away one of the last of the traditional employee benefits! We’ve already lost pensions. The time off policy, with increasing levels of time off given # of years service, is a classic retention bonus.

With this new policy, there is one less reason for people to stick around at your company for a longer period of time.

Young engineers tend to not take time off.

This policy takes advantage of more junior engineers. In my experience entry-level employees tend to have less personal responsibilities (spouses, kids, etc.) and tend to take less time off. With this policy i’ve seen many of these folks taking way too little time off (<1 week a year).

These people should be taking time off work and exploring life. Their outside interests and explorations will bring new ideas into the company.

When you leave, you don’t get paid for any accrued time off

One nice benefit of the accrued vacation policy is that once accrued, you’ve earned it. When you leave the company you receive a check for any time earned but not used. This creates a nice cash flow cushion, helping you transition to your new job more easily.

With the unlimited policy you are paid nothing when you leave.

Summary

The unlimited vacation policy is here to stay. Why? Because it benefits employers, whose primary purpose is to maximize return and productivity from their workers.

In my experience, this policy is all marketing, with no benefits to workers.

What are your thoughts on this policy? Do you see it actually working in your business?