The benefits of unlimited time off
It makes sense that companies have a lot to gain by implementing such a policy when you consider how it impacts employee engagement. Giving workers more autonomy allows for better physical and mental health, closer relationships, increased productivity and new and fresh perspectives. There are other benefits for companies that offer an unlimited annual leave policy:
- It’s good for recruitment. Because employees highly value the benefit of unlimited time off, having an unlimited annual leave policy is an asset for companies that want to recruit a top-notch workforce. And, since there is only a small percentage of companies that offer such a policy, those that do have a recruitment edge.
- It can increase productivity. When an unlimited time-off policy is implemented well, it should not reduce productivity and may even increase it. In fact, a year after Indeed rolled out its unlimited time-off policy, during which time employee holiday days increased by 20%, the company was still able to significantly increase headcount, open new offices and boost monthly visitors to its website.
Convincing employees to take unlimited holiday days
As more employers embrace the idea that productivity doesn’t just come from hard work but from a balance of work and time off, they’re looking at not only implementing new policies but also fostering a shift in their company culture, to one that places a high value on employee happiness and engagement. However counter-intuitive it might feel, companies that want to boost employee engagement should encourage workers to take time off. But while convincing employees to work less might seem like an easy task, in reality, many are reluctant to unplug. A recent survey found that Australians have 209 million days of accrued annual leave unused.
Preventing abuse and keeping up productivity
Offering an unlimited time-off policy is not for every company. It takes resources and commitment to make it work for employees who wish to access it. Employers looking to implement such a policy must evaluate whether they’re ready for such a move. Here are some things that employers thinking about incorporating an unlimited annual leave policy should bear in mind.
- The company culture must be employee-focused. The shift from a traditional holiday plan to one that is open and unlimited has to be supported by a culture that is trusting and values employee autonomy. If morale is low, employees are more likely to abuse the system.
- Encourage employees to take time off. Many employees feel guilty about asking for time away from work. Some can become ‘paralysed’ at the prospect of having so much choice. If employees haven’t taken time off in a while, managers should ask how they are doing and whether a break would be beneficial.
- Lead by example. Senior staff need time off just as much as subordinates, and can help to encourage employees to take leave by doing just that. Once employees see that business still hums along even when managers are out for a while, they’ll be more inclined to do the same.
- Talk about the issue frequently. Executives and managers should educate employees about the company’s annual leave policy and its benefits. Managers should help workers understand that the purpose is to support them in maintaining a healthy work-life balance, and that they trust them to decide how much time off is necessary to stay productive while investing in self-care.
Practical concerns for Australian employers
Australia has an employment culture that regards time off as an employee entitlement rather than a nice-to-have. The majority of workers are protected by the minimum leave entitlements of the National Employment Standards under the Fair Work Act 2009, or by modern awards or registered agreements. Establishing a policy of unlimited annual leave in this environment poses some specific challenges.
- Managing and planning leave. There needs to be good manager-employee communication. Unlimited annual leave doesn’t mean unplanned annual leave. Supervisors and HR must have open lines of communication with employees to ensure that leave is requested with ample lead time. As with a traditional policy, annual leave must be appropriately staggered and scheduled so they don’t hamper productivity.
- Calculating leave balances for financial reporting. Annual leave that is accrued but not taken is treated as a liability on a company’s balance sheet, as it’s effectively a debt. When leave doesn’t accrue in the usual way, accounting for it for financial reporting may be difficult, particularly in the first year or two when there is little data on actual leave use.
- Record-keeping considerations. The record-keeping obligations of the Fair Work Act still apply with an unlimited annual leave policy, meaning HR procedures need to ensure the relevant information is kept and managed.
- Calculating leave balances for payment on termination. Employees are entitled to have the unused balance of their leave paid out when they leave an employer, but having unlimited leave makes it impossible to quantify an unused balance. One approach may be to calculate leave balance against the statutory minimum entitlement, although this raises the further issue of what leave an employee is taking at any given time, their statutory minimum portion or the discretionary unlimited portion. For example, the policy may require employees to use up all of their statutory entitlement before taking ‘unlimited’ leave.
- Drafting employment contracts and policies. The above issues raise several potential ambiguities that can arise in implementing an unlimited annual leave policy. These need careful consideration, and possibly legal advice, when it comes to drafting policies and employment contracts to ensure that minimum statutory entitlements are not undercut, and the process for requesting and approving leave is fair and transparent.
