Would Unlimited Vacation Fly at Your Company?

Life is a Beach

Employers have found a new way to entice top talent to their company. They're giving employees something they've only dreamed about — unlimited paid vacation days.

Over the past several years, a growing trend among a number of businesses has been to offer employees the added perk of being able to take vacation days whenever, and as often, as they like.

While unlimited vacation policies have been lauded in larger companies like Netflix and Zynga, the question is whether they're plausible for smaller businesses that can't afford to always have someone fill in for unavailable staff members.

[The Happiest Jobs in America]

Christina Gomez, a partner with the law firm Holland & Hart and an expert on labor and employment matters, said unlimited time-off plans can work for any size business.

"The size of the company is not as important as other things, like whether this kind of policy fits with the culture of the company, whether the nature of people's jobs in the company lends itself to this kind of policy, and, when this kind of policy is paired with a flex time or telecommuting policy, whether employees need to be in the office collaborating on their work or whether they can do their work elsewhere on their own time," Gomez told BusinessNewsDaily. "It really just depends on the culture of the company and the nature of the work."

A recent study by the Society for Human Resource Management found that 3 percent of employers now offer unlimited vacation policies, up from 2 percent a year ago. Gomez said there is a wide range of benefits that come from giving employees the ability to take off time as they please.

"It can boost employee morale by showing employees that you trust them and have confidence in them," she said. "It encourages employees to have a more balanced life and explore interests outside the workplace."

For the employer, Gomez said it can increase productivity by getting employees to make the most out of their time in the office.

"It enables companies to provide an additional job 'perk' with little to no added cost, because the idea is that even if employees are taking more vacation time than they used to, they are more productive during the time they are at work," Gomez said. "It can improve efficiency and productivity, by incentivizing employees to get their work done more efficiently so that they can take time off."

Michael Garber, founding partner of market strategy and growth consulting firm Southern Growth Studio, has offered an unlimited vacation policy since starting the company in 2007. He said the key to making the perk workis hiring the type of people that won't abuse such flexibility.

"We hire passionate people that identify with their work," Garber said. "Empower the people and they will give their best."

In the six years Southern Growth Studio has been open, Garber said not one employee has taken advantage of the policy.

"It is a true win-win," he said.

While many companies see a number of plusses to such a perk, Gomez warns there can be downsides. Besides the obvious riskof employees taking too many days off and abusing the benefit, she said unlimited vacation polices also take away a business' opportunity to reward long-term success, such as by offering more annual vacation time the longer an employee has stayed with the company.

There are also a number of legal risks that businesses must consider when implementing an unlimited vacation plan.

"For instance, making sure that they track and pay any necessary overtime, making sure that they treat people similarly to avoid claims of discrimination or retaliation, and ensuring that they still comply with the FMLA, the ADA, workers’ compensation laws, and other laws touching on leave issues," Gomez said.

Bruce Elliot, a manager of compensation and benefits for the Society for Human Resource Management, believes unlimited vacation policies work best at the executive level only, and not on a company-wide basis.

"It sounds wonderful and great from a financial point of view and an employee relations point of view," Elliott said. "But unless you have some solid controls in there, you are going to get the employee that is going to take advantage of this and then some."

He believes unlimited vacation policies work for upper management because in most cases they already don't take the vacation time they've earned.

"If the standard allotment is three weeks, I'd bet you a buffalo nickel they don't take the full three weeks in any year," Elliott said. "They continue to accrue a benefit that ends up being a liability on the books."

Elliot said companies considering the unlimited vacation benefit may be better served offering a total paid time off plan that combines sick and vacation days, rather than just giving employees free reign.

"It provides more flexibility and is a better benefit for the employee who never gets sick, because they can use that extra time for vacation and time off," he said.

Gomez said small businesses that are considering offering unlimited vacation days need to particularly consider several factors before moving forward, including the kinds of employees the policy could work for, what limitations should be put on the policy, what methods should be used to approve vacation time and ensure consistent adequate coverage, and how employees' existing leave banks will be cashed out or used up.

Moving forward, Gomez expects the perk to become more popular with both employers and employees.

"With advances in technology and more people working remotely these days, it just makes sense to add more flexibility in the use of vacation time," she said.

Follow Chad Brooks on Twitter @cbrooks76 or BusinessNewsDaily @BNDarticles. We're also on Facebook & Google+.