Is Unlimited Paid Leave a Bad Thing?

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When Netflix announced their unlimited paid family leave offering it appeared to represent a major shift in both public opinion and corporate policy. The media heralded it as a bond of trust, a new brand of flexibility, the future of better work-life balance…but is it really a good thing?

First of all, it is important to recognize that unlimited vacations are not right for all organizations. There are real obstacles to overcome with a large non-exempt employee populations and certain industries like retail, restaurant, hospitality, healthcare, call centers, and transportation that need 24/7 coverage may also struggle. The best candidates for this type of policy are professional, exempt workforces (i.e., accounting or tech).

Culture Shock

To understand the potential downsides, we need to accept a few more realities. Despite a near-universal desire for paid time off, each year many workers fail to use all the time they are offered. A Glassdoor survey in 2014 found that only 25% of American employees with paid vacation took all their allotted time off; 40% of employees surveyed only took 25% or less of their available time off. Even if this was just a small segment of the working population (which it likely is), it provides important insights on the powerful effects of company culture or internal conflicts. Some of us may struggle to take time off of our own accord due to the following:

  • Failure to delegate—Workers might think they are the only ones who can really do their job.
  • Fear of replacement—Workers might believe that if things go on as normal while they are away, they may no longer be seen as a critical necessity.
  • Fear of missing out—Workers might believe that they will be passed over for promotion if they take a lot of leave and don’t “fully commit” to the company.
  • Gap in workplace culture—The company may actively or passively discourage the use of time off through mixed messages, confusing policies, or leadership example.
  • Failure to unplug—Some workers cannot disconnect during time off, and still check emails, take calls, and do catch up work when they are supposed to be relaxing.

Unlimited leave could potentially break down the institutionalized structure of company policy, relying instead on the loose norms and informal guidelines of a company’s culture. Why is this a bad thing? Because it’s clear that some workers need an extra push to take time off. “Use or lose” or other strict accrual policies may not sound nice, but sometimes we need that rigid structure or benchmark to serve as a motivator and reality check.

If these workers already feel that they cannot take leave in the first place, then offering more will not solve the issue. What could solve the time off issue—for almost all workers—is a more intentional, better managed time off policy.

Tricky Technicalities

Unlimited time off may face another problem: visibility. If time off is truly unlimited, then organizations might no longer officially keep track of it, because why should they? It’s limitless! The lack of rules or guidance turns a workplace into a quagmire.

For example, we would assume that taking off time—even in an unlimited type policy—would still require a leave request. But what if the employee wasn’t exactly sure how long he planned to take off? What if at the end of his first 2 weeks off, he requested 2 months more? It’s unclear how the organization would determine whether to hire a temporary worker or simply adjust or redistribute the absent employee’s workload.

Additional confusion could also stem from technical elements, such as “Would the employee on leave be marked as “active” or “inactive” in the company security system?” or “Will we need to give this employee a VPN so that they can check in from home?” Unknown and erratic leave usage causes headaches for:

  • IT (e.g., handling user access)
  • HR (e.g., employees missing important training dates)
  • Payroll (e.g., will this leave count towards overtime?)
  • Operational managers (e.g., inability to forecast available capacity)

Tracking and labelling time off, even if it is unlimited, makes sense from several perspectives. First, it allows the organization to understand how frequently and why employees are taking time off. The labels do not need to expose any private information to be considered valuable. For example, if employees are taking a lot of time off due to inconsistent daycare or babysitters, the organization may want to invest instead in an on-site day care center. Second, tracking and labelling avoids exposing the organization to risk and abuse. For example, employees may use the time off to avoid working on a certain project or they may leverage it against disliked employees (“If we all take our leave at once, Kevin will be left with full responsibility for the work”). Labelling and tracking the leave, even if there is no limit, can help the organization better manage, monitor, and control it.

Misplaced Incentives

Unlimited could sound like a good thing until we try to quantify it. Leave days, or paid time off, each have an associated monetary value. Many organizations award time off as an accrual, meaning that the more employees work, the more time off they gather. Since these accrual banks are cost and productivity liabilities for a business’s bottom line, it is important to track their use (and abuse). When an organization provides a finite number of paid days off, they have an accurate estimate of how much that incentive will cost. However, budgeting for an unlimited time off policy can be complicated, if not also wildly inaccurate. What measures or benchmarks do you use? What makes the policy cost-effective of not? Questions will lead to further questions.

Another concern is the cash payout. In some organizations, if an employee leaves the organization with paid time off still in their accrual bank, the employee could be paid a cash value for that time. In the traditional model, employees have a choice to either enjoy the time off or the monetary reward. So unlimited leave time could potentially dissolve or increase the liability for the business and change the reward model for the employee.

Opportunity Overload

While unlimited time off could eliminate the choice between money and time off, it may also upset the employee’s own sense of work-life balance by creating too many choices. If an employee knew she had 12 days off and only used 9 of those days, she would know she had 3 days of unused leave left. In an unlimited leave time model, she may not know if 9 days was too much or too little. If she receives a poor performance rating or a smaller bonus, she may regret taking advantage of the unlimited time off policy (even if that had no effect on her review), cancelling any gain in satisfaction or engagement.

The Effects on Productivity

Open-ended policies like unlimited leave require strict definitions in other areas, such as productivity. For professional workers in technical or knowledge-based jobs, unlimited leave time may make sense. These employees typically work on project-based work that doesn’t necessarily need to happen at a certain specific time and place. If an exempt professional wants to work a few 12 hour days to complete their work and then take a leave, then they can do that without significantly affecting productivity. However, for a large percent of the American population working hourly jobs, their work does need to occur at a specific time and place. In fact, their presence (or lack thereof) directly affects productivity making unlimited leave policies difficult, if not impossible, to implement.

The administrative support required to effectively execute this policy for a diverse worker group (meaning hourly and salaried) would be substantial. If an organization does not track the use of time off (and in effect does not measure its affects), then unlimited paid time off could become a mysterious, and even contentious, perk.

Balanced View

Unlimited leaves are rare and coveted benefits to those on the outside, but they are not completely novel or perfect solutions. Other firms, primarily made up of knowledge and professional workers (Groupon, Evernote, Ask.com, SurveyMonkey, etc.), offer this creative option to workers as a part of their hiring and retention package—but beware of the (invisible) strings attached.