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Extended leave not all it's cracked up to be

You just came back from summer vacation a week ago and already it feels like a dream. All those relaxed-start mornings and nights that didn’t have to end at 10 p.m. have faded into a stale status update.

Hang on though. What if your holidays didn’t have to end? What if you worked for a business that gave its employees unlimited time off to kick back, recharge and come back to work fresher and sharper than ever?

Companies such as Virgin Group, Netflix and Best Buy have garnered headlines over the past few years for so-called “unlimited” paid employee vacation and leave plans. General Electric has also joined the fold with a “permissive approach” to paid time off for nearly half of its 70,000 U.S. employees. Netflix recently reminded us how sweet its vacation policy is by extending the unlimited idea to maternity and parental leaves too (during a child’s first year) – for certain employees in its higher skilled jobs.

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We’re not going to see the majority of employers jumping to this benefit any time soon.”

Bruce Elliott

But opinion is mixed as to whether this is a gamechanging trend or a sexy but short-lived PR perk – and even if it is a true perk at all. While “unlimited” sounds great, it still has conditions in practice, often requiring employees to still get management approvals (and gauge how much they can safely ask for), make their own arrangements about how their work will be covered off by others and ensure clients are kept happy while they’re away.

“If anything, I think the numbers are probably going south,” says Bruce Elliott, manager of compensation and benefits for the Society for Human Resource Management, based in the U.S. Its most recent survey of 3000 U.S. companies actually saw a slip over 2014, from 1% to less than 1% of companies reporting some kind of unlimited vacation or leave policy.

“We’re not going to see the majority of employers jumping to this benefit any time soon,” says Elliott, adding that the real trend in the U.S. is towards more paid maternity and parental leave.

Experts agree that such policies need to fit with a workplace’s culture and companies need to assess whether employees will see an unlimited policy as a plus or not. In late 2014, Tribune Publishing in the U.S. reversed its “discretionary” vacation and sick day plan only a week and a day after announcing it, because of widespread employee anger about jettisoning the traditional fixed, predictable vacation policy.

Unlimited leave and vacation policies are not “a complete flash in the pan … [but] you’ve got to have the right culture or it’s going to lay flat,” says Julie Stich, director of research for the International Federation of Employee Benefit Plans. Companies that are already promoting work-life balance, have their employees’ trust and give their workers lots of autonomy to get work done will do best with it, she says. Service industries, such as those involving shift work, are not so well-suited.

 

With such complications, it’s a wonder companies have tried out unlimited leave policies at all. The answer to that however is crudely simple. It all started from a financial problem. Terry Smith, a partner with Mercer Health and Benefits and an occasional consultant to Canadian companies, traces unlimited plans’ origins back to Silicon Valley in the late 2000s.

Executives at innovation-intensive high tech companies were wrestling with what to do about massive accruals of employees’ unused vacation. Staffers weren’t taking enough time off and their unused days were building up on the company’s books as an accounting liability. Making vacation unlimited, rather than a fixed benefit, solved that problem. Once other employers in the region took notice, they jumped on it too, in order to stay competitive on benefits among highly-coveted talent.

Simplifying the administration side also influenced Toronto-based RL Solutions, a company that develops healthcare quality improvement software and employs about 200 people. Keeping track of vacation usage was creating a lot of “hassles … It was just one headache after another,” says CEO Sanjay Malaviya. So in 2011, the company ditched its vacation policy entirely. People still take time off, but do it in consultation with their colleagues.

“We want to ensure that we work with people that we love, that we trust and so when you have that kind of working relationship, you don’t really need to keep tabs on each other,” says Malaviya. “We don’t really see it as a fad. We just see it as a natural extension of who we are.”

Waterloo-Ont.-based Karos Health introduced its unlimited vacation policy in 2013 and touts an extremely low employee turnover as a result.

As a smaller company unable to match the same compensation offered at larger businesses, the unlimited vacation benefit is one way Karos can keep competitive on talent.

Vacation requests at the healthcare management software company still require manager approval and employees are responsible for coming up with a plan that details who will take care of their duties while they are gone. Employees typically take an average of about 20 days off, a number consistent with what other companies interviewed for this story reported.

As a smaller company unable to match the same compensation offered at larger businesses, the unlimited vacation benefit is one way Karos can keep competitive on talent, says Skye Fleming, the company’s human resources manager. Karos has 32 full-time employees in its Waterloo office and about the same in another office in Copenhagen.

“It had an immediate impact on [employee] draw for certain,” says Fleming, a mother of four who says the policy has worked “really well,” for her family, allowing her to comfortably take time off for her children’s school events and concerts instead of feeling she has to chip away at a fixed number of vacation days.

While Canada is “trailing” the U.S. on the unlimited perks, “it’s absolutely trending up,” says Smith, as the policy becomes more of the norm in certain industries State-side and companies operate more globally, requiring more uniformity and fairness in how employees are treated across regions. And it’s moving beyond its original home with start-up tech companies into more established businesses and even hospitals.

“I’ve had far more calls and discussions [on them] in 2015 than in 2014,” Smith said, regarding Canadian interest in adopting unlimited leave policies. “These are absolutely here to stay.”