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Unlimited vacation time cropping up at startups, GE, but policy rare

Is unlimited vacation time the new flextime for companies eager to attract and hold on to talent?

As a tech-centric company that has retained its startup vibe, GrubHub sought to align its vacation policy with...

its forward-thinking work culture.

So, GrubHub last year lifted its limits on how much time employees could take off.

"It goes to the bigger issue of how we trust and value our employees. We trust employees to take the time they need, and the policy really allows for that," said Meghan Gage, a spokesperson for the 12-year-old GrubHub, an online and mobile food ordering company with dual headquarters in Chicago and New York City.

As it turns out, GrubHub is not alone in offering unlimited vacation time. And while the perk sounds like a dream for employees -- and a nightmare for managers and HR -- so far, it's not, according to several sources. They said the vacation policy is more about offering the kind of flexibility that an increasing number of employees expect -- particularly highly skilled, in-demand workers, like some of those in IT. It also fits better with corporate cultures promoting more collaboration and innovation. Moreover, they said an unlimited vacation policy can actually streamline vacation management, while also helping attract and retain talent.

"It's been a really positive benefit for us, and employees have been really happy with the change," Gage said.

Unlimited vacation time: The fine print

Despite the name, Gage said unlimited vacation time comes with parameters. First off, the policy doesn't apply to everyone, but instead to only exempt full-time employees. Managers must approve planned time off, and employees must let managers know when they need time off unexpectedly.

"It's keeping those lines of communication open," Gage said, adding that, so far, there have been no unusually long absences or problems arising from the vacation policy change.

The benefit is far from commonplace.

The Society for Human Resource Management's 2016 Employee Benefits Survey found that of the organizations offering paid leave -- and nearly all did -- only 5% provide employees some type of unlimited leave. More specifically, 4% offer paid unlimited time off and 1% offer unpaid unlimited time off.

Evren Esen, SHRM's director of workforce analytics, said the survey doesn't break out the types of companies offering this benefit. But she acknowledged this workplace trend did spring from the Silicon Valley and tech startup set where competition for talent is fierce.

"When we hear about these innovative benefits, they usually do come from the tech companies and the startup companies," she said, adding that telecommuting and flexible schedules took off after being promoted as perks by some tech industry firms.

However, Esen said unlimited vacation time has not taken off in the way telecommuting and flextime have. She noted the statistics for unlimited time off have remained flat from the SHRM's 2012 survey to its current one.

'Permissive' approach to time off: GE

Still, it's catching on among some larger, established companies.

Barbara Carmichael, global benefits manager, GEBarbara Carmichael

General Electric is one of them. GE, the American multinational conglomerate, in early 2015 started rolling out unlimited paid time off to select workers in the United States and Puerto Rico, according to global benefits manager Barbara Carmichael. Today, 60% of its 105,000 U.S. workers and 15% of its Puerto Rico employees enjoy this benefit.

Carmichael said the move simplified administration of the company's vacation policies -- no more need to track which workers earned how much time off. And she said it fit better with the company's evolving culture, as it positions itself as a digital industry. "One of our GE beliefs is to inspire and empower each other. This really demonstrates this," she said. And it helped recruiters bring in new hires.

However, Carmichael said it's not a free-for-all. In fact, Carmichael noted that GE was careful from the start about the terminology. It's not "unlimited time off," but rather "a permissive approach to time off." Employees must still work with their managers to schedule and plan for their vacation time. As such, GE offered training to not just HR workers, but to managers throughout the organization so they could implement the novel vacation policy in their own departments.

Carmichael added that GE does not extend the vacation policy to salaried nonexempt workers because of the complexities and challenges of making the policy square with labor laws.

American workhorses

Survey respondents in the SHRM report also pointed to such benefits and challenges of unlimited leave.

"Organizations that offered unlimited leave indicated that it is a positive benefit that allows employees more flexibility and time to spend with their families, boosts morale, helps with recruitment and retention, fosters trust and accountability, and encourages employees to take leave when they are sick," the report stated.

The report further explained, "Some of the challenges of offering unlimited leave are: Employees may take advantage of it and take too much time, while others do not take enough time off (which is why some organizations implement a minimum number of days that need to be taken); it can be hard to implement fairly and ensure all employees have equal opportunity to take the leave they need; and it can be difficult to find coverage for employees on leave."

There's still a little bit of angst about how to make this policy work.
Evren Esendirector of workforce analytics, Society for Human Resource Management

Esen added, "There's still a little bit of angst about how to make this policy work."

Also, guilt gets in the way. Many employees are unfamiliar with the benefit, so they're hesitant to use too much of it, she said. Managers and leaders struggle with how to plan around unlimited vacation time, particularly when faced with a longer-than-usual absence. And both managers and workers sometimes wrestle with whether, and how much, work should be done in advance of vacation and upon return versus how much gets shunted onto the employees left working in the office.

Esen acknowledged those challenges exist in degrees even at companies where the amount of available paid time off is set. Perhaps, she said, that's why Americans have historically and continue to have a problem with taking enough time off.

True, according to the U.S. Travel Association. The "The State of American Vacation" reported 55% of American workers left vacation time unused in 2015, forfeiting a total of 222 million days.

Maybe Americans first need to figure out to take what they're allotted before they can learn to enjoy even more.

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Great perk or looking for trouble: What's your view of unlimited vacation time?
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I have worked for 2 companies that had this policy

The first was a design agency where vacation was only approved for non-billable time. As long as there was work to do, you could not leave.

The second had a clause that managers could only approve up to 3 weeks vacation time per year. Requests for additional time were reviewed by senior leadership. 

One theory is that startups wanted a way to reduce paying out unused vacation time to employees when they left the company.

Cancel
Wow Jason, those policies sound awful. Obviously both companies took steps to make it difficult to actually use much vacation time - and more than 3 weeks is really not unreasonable. I have over 4 weeks available to me, and I use it.

I can't imagine the people on my team using more vacation time if it were "unlimited". If anything, I think that it would cause more uncertainty, and people would be uneasy about taking the time for fear of appearing like they're not as dedicated as the next person. 
Cancel
I think it can end up making things very manager-dependent, where some people feel more empowered to take time off when they need it, and others don't. The challenge is making sure that things are applied as equally as possible across the board, and that it doesn't negatively impact anyone.

I can definitely see more companies moving toward a system where 'getting stuff done' is the goal above all, especially when employees are more and more distributed and flexible in their work hours.
Cancel
My last company offered 3 weeks of annual vacation with multi-week extensions readily available. OTOH, no dates were ever approved when the company was busy. The company was always busy and would never cover anyone. So sometimes I took a long weekend....

If companies offer extended vacation time they need to honor it. I've found few do. More of a Bait and Switch policy than anything resembling reality.
Cancel

I’ve been part of three companies that introduced this
policy purely as a way to increase their bottom line. One (a Fortune 500 company) went so far as
to tell Managers that they were expected to track the time off their people used and reduce the vacation
time taken year over year by just denying the request. Since my teams are often in mission
critical roles, accrued PTO often become a sort of bank account that is guaranteed
to payout someday (even if that isn’t until I leave the company) and I way to fight for people to get the time off they deserve (even if it's when they are about to max out their PTO). With the new “unlimited
vacation time” policy, you no longer have any right to personal time off –
there is the illusion that you can take time when you need to take time and
that you can take as much time as you need, but there is no requirement for
them to give you any time.   

Cancel
It's certainly a great perk that private businesses can choose to do. In fact, I think it would be a great way to weed out the riffraff among the performers/achievers. Abuse the benefit...? Not producing like you should...? You're out.
Cancel
I disagree with the idea that 6 weeks (or more) of vacation time per employee per year will drop productivity.

My company defers half my pay for banked vacation time. It isn't called that, but that is what it is. So -- it is not unlimited vacation time. But which of you work for 6 weeks and get 6 weeks of paid vacation? Mind you, when I'm working, I work 12+ hours per day, seven days a week, for the entire six weeks.

We had a much less generous vacation package a few years ago and had a 30% employee turnover every year. Productivity has risen; accidents and incidents have reduced greatly. Now, vacation is only part of it. We use Deming's Process Improvement, among other ideas.

Cancel
I think that it's an attractive benefit, and if a local startup offered this perk, that would appeal to me. Most of the startups around my local area offer really poor benefits, including time off. 

One company that I interviewed with offered little vacation, and on top of that, they even told me that when there is a federal holiday, employees are expected to work extra hours the rest of the week... but the company will buy lunch, so sure, that makes it ok!
Cancel

Don't Believe the Hype ... While I’m sure that some companies implement this just the
way the tell people, I’ve been part of three companies that introduced this
policy purely as a way to increase their bottom line. One even went so far as
to tell Managers that they were expected to track the time off and reduce the vacation
time take by just denying the request. Since my teams are often in mission
critical roles, accrued PTO often become a sort of bank account that is guaranteed
to payout someday (even if that isn’t until I leave the company). With the new “unlimited
vacation time” policy, you no longer have any right to personal time off
there is the illusion that you can take time when you need to take time and
that you can take as much time as you need, but there is no requirement for
them to give you any time.   

Cancel

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