Unlimited Vacation: Don’t Worry, Be Happy

By Matt Swenson, November 18, 2014

Feel like you’re not doing anything other than working? If so, it’s probably because you aren’t. The average American doesn’t use more than three full days of paid vacation per year, according to the U.S. Travel Association. Studies show that not taking enough time off has a negative impact on productivity at work and happiness in and out of the office.

This trend has resulted in something of a backlash movement: companies offering unlimited vacation time. The most recent to adopt the policy is Richard Branson, the colorful billionaire and founder of Virgin Group who in September announced he would test the idea with 170 members of his personal staff before rolling it out company-wide. In doing so, Virgin joined the 1 to 2 percent of companies offering such a plan to employees, a group that includes Netflix, Ask.com, The Motley Fool and Groupon.

The reasons a select, but growing, number of organizations have gone this route is to improve employee morale, which in turn would lead to reenergized and refocused workers. Thus far, the results are positive.

“It’s a great benefit for organizations that have a culture centered around performance, where expectations [for] employees are clearly communicated and where there’s a lot of trust between employees and the employer,” says Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management, a 250,000-member global association for HR professionals.

That said, Elliott believes the policy is not a good fit for every industry, including hospitality, because of the importance of manning phones and desks and cleaning rooms. He adds it will be several more years before unlimited vacation is the norm. “This is anything but a trend,” he says.

Katie Denis, senior program director for Travel Effect, a research-driven division of the U.S. Travel Association, believes it’s possible other organizations will eventually follow in Virgin’s footsteps. She and Elliott note that unlimited vacation time frees HR departments from the time tracking that data. For instance, Ask.com has eliminated 52 hours annually of tracking vacation and following up with employees since implementing the strategy, Elliott says.

“They’re able to take the time they are saving and put it into more value-added activities,” like recruitment efforts, Elliott adds.

Despite the freedom, Elliott says there’s little evidence of abuse by employees. Some may takea sabbatical or extend a honeymoon a few days, but the end result is they generally take off the same amount of time, with it spread out a bit more evenly throughout the year rather than during the holiday rush.

But that means workers in that type of environment are still not using the leave they need to be completely refreshed. Denis’ concern is trying to “rewire Americans,” as she puts it, to use the leave they’ve earned.

“Your vacation time is not a frivolous perk,” she says, referring to USTA’s findings that, on average, workers leave more than three days of PTO on the table per year. “It’s important for your health, your happiness and your career success.”

A study released by Travel Effect in August found that 96 percent of workers, including senior management, consider taking personal time off important, but nearly one-quarter of them take nine or fewer days off per year.

There are several reasons for the disconnect, beginning with what Denis says is a martyr complex many workers have. They feel like no one else can do their work, as 35 percent of respondents reported. Forty percent said the fear of returning to a pile of work serves as a deterrent to vacation time. Another major factor is that two-thirds of workers said their companies give them mixed signals about taking time off.

Denis says Branson’s announcement hit all the right themes, but it was just words. For now, she says, the biggest benefit of Branson’s bold move is bringing the subject to the forefront. “It starts a valuable discussion about the importance of time off,” she says. 

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  • Frank A Smith

    I wonder how personal finance plays a role in employee decisions about PTO. I have lots of PTO available to me but I am loathe to use some of it for a “staycation” and traveling multiple times a year would cut into other financial goals. Perhaps our cultural perceptions that PTO should be used for some special experience rather than for re-charging is part of the problem

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