Unlimited vacation: is it really beneficial for workers?
Several studies have found that unlimited vacations have benefited companies more, saving them billions of dollars, than their workers, who then do not even use them.
In recent times, some companies in the United States have put on the hiring table a benefit that seems very attractive to many workers: unlimited vacation. Can you imagine having a large number of days off without worry? It all sounds like a dream. We’re afraid to tell you that there’s a catch where employers benefit the most, over their workforce.
The dynamic is this: instead of having a set number of fixed paid days off per year, you can take as many days off as you want, as long as you do your job. This unlimited time off is unpaid.
According to a recent survey by The Harris Poll/Fortune, workers want unlimited time off more than they want tuition reimbursement, subsidized child care or free snacks at the office.
Yet, despite all that presumably benefits workers who have unlimited vacation, recent research shows that the deal is much better for companies.
The United States is the only industrialized nation that does not legally require paid time off for workers. That means U.S. companies that offer vacation days to their employees do so as a business expense, along with workers’ wages and other employment benefits.
Many states also require companies to pay earned time off when a worker leaves, which means that workers’ earned time off is a liability for companies.
Today, U.S. companies have hundreds of billions of dollars in liability for workers’ unused vacation days. Peter Cappelli, director of the Center for Human Resources at the Wharton School of the University of Pennsylvania, estimates the national total to be about $224 billion. Sorbet, an app that helps employees cash out their accrued leave, raises that total even higher, to $318 billion a year.
And here’s where the catch is: under unlimited or flexible vacation policies, workers no longer have to earn a set amount of time off, meaning they are not entitled to compensation for unused vacation days. In this sense, when companies offer unlimited vacation days, they erase billions of dollars of liabilities from their budget.
For Cappelli, author of the recently published book “Our Least Important Asset: Why the Relentless Focus on Finance and Accounting is Bad for Business and Employees,” the shift to unlimited vacation is one of many bad policies caused by an excessive focus on corporate balance.
“If you go from accrued vacation time, where you earn it and the company owes it to you, to unlimited vacation time, it goes from an explicit contractual obligation to sort of a moral obligation, an informal obligation,” Cappelli tells CBS MoneyWatch.
To make matters worse, workers with unlimited vacation really don’t take their vacation as freely. Too often, generous-sounding policies exacerbate the main reasons U.S. workers cite for not taking vacation in the first place.
A 2018 study by human resources firm Namely found that workers with “unlimited” plans actually took two fewer days off per year than workers with traditional plans. When Kickstarter switched to unlimited, the company found that employees actually took less time off, a reason the tech startup cited when it abandoned its free vacation policy in 2015.
Even when workers earn a set number of days, they often don’t use all the vacation time allotted to them, citing reasons including guilt, fear of accumulating unfinished work and pressure from their manager.