• Unlimited holiday – a dream benefit, fraught with complexity

    Many employers will be in no doubt that the pandemic has caused a permanent shift towards flexible, remote and hybrid working. We have all seen how many roles can be performed in ways which pre-pandemic would have been viewed at with great caution, if not suspicion.

    Time off and flexible working has been a much talked about topic over the past year or so (recall the somewhat frenetic holiday and furlough discussions, the extension of the right to carry-over holiday, as well as the ever-changing international travel bans/quarantining/sickness absences all of which had to be managed).

    The pandemic has also brought into sharper focus mental health in the workplace and employee well-being. Whilst the stress of the pandemic is abating many employees simply do not want to return the stressful commute having had the luxury, for some, of working from home. Many more simply do not to return to full time working, having been flexi-furloughed or working short time. The pandemic has shown us perhaps the benefits of less work and more time.

    With the above in mind, employers would be wise to consider whether now is the time to ditch the traditional “20 days plus bank holidays” approach to holidays and move towards a more flexible “unlimited holidays” style offering. Of course, the flip side of this is whether working hours themselves are even relevant at all for some roles which can be performed as and when the work is needed, rather than during more conventional “working hours.”

    Has the 9-5 working week and prescribed holiday model simply become obsolete for many?

    What does “unlimited” holiday really mean?


    Unlimited holiday first took off in the US (where there is no statutory holiday entitlement as such and most employers only offer 10 days holiday after one year of employment, in fact the US virtually stands alone in this respect), as well as within the technology/start-up world, which of course lends itself to this highly flexible model. Essentially unlimited holiday is a policy where employees are given no set number of holiday days per year, meaning employees can – at least in theory – take as much or as little holiday as they like. Sounds great…

    Many global companies have successfully implemented this policy. Considered one of the best employers globally, Netflix was one of the first to offer unlimited holiday to its staff. LinkedIn, Evernote and Virgin have also reportedly adopted such policies, too. However, some companies have since killed off the policy as it proved to have some unforeseen downsides for both employers and employees.

    Take-up of such unlimited holiday in the UK remains relatively low, although job site Indeed.co.uk reported that since 2017, the number of job posts on its site mentioning unlimited holiday have increased by 148%. Despite this dramatic rise, unlimited holiday policies remain rare, with only 1% of jobs on the site offering it.

    Current Holiday Regulations & Practice


    The Working Time Regulations 1998 place strict obligations on employers to ensure that workers take adequate rest breaks and holiday. This is important to remember; whilst holiday is undoubtedly a perk and seen as a benefit, it is at its core a health and safety measure ensuring that workers get enough rest to carry out their work safely.

    Under the Regulations workers are entitled to 5.6 weeks’ holiday each year and payment in lieu of accrued but untaken holiday on termination. Employers can offer more generous holiday entitlements but not less.

    Employers also have a responsibility to ensure that workers do take their statutory minimum entitlement. This requires employers to be able to show that they enable their workers, through the provision of sufficient information and monitoring, to take their annual leave and keep records of their working time.

    Creating an Unlimited Leave Policy


    The beauty of an unlimited holiday policy is that every employer can design how this will work for itself, within the constraints of existing laws.

    However, whilst the idea of unlimited holiday sounds great, it may well not be workable for many businesses which have regular daily operational needs that necessitate the presence of their workers to maintain output/opening hours.

    If you’re considering introducing unlimited holiday, getting the policy right will be key.

    You’ll need to make sure your policies are operationally sound and fair. You should consider practical issues like:

    • Setting out procedures for giving notice of leave and requesting leave;
    • Setting out times when holiday cannot be taken or must be taken (due to site closures/public holidays/busy period);
    • The right for your business to refuse specific leave requests;
    • How the business will deal with competing requests or department needs;
    • Consider how you’ll deal with the concept of “carry over” if for example an employee doesn’t even take the statutory minimum entitlement in any one year;
    • Setting a maximum number of days which may be taken at any one time;
    • Being mindful of potential discrimination issues arising in how the unlimited holiday policy is being implemented;
    • Introducing performance targets as a pre-requisite to being entitled to take leave. This will introduce a novel relationship between performance and holiday. An employee’s performance has never so far been relevant to entitlement to holiday, but with unlimited holiday the two could interplay considerably.
    • How employees will be performance managed if the amount of holiday being taken is affecting their performance.

    Employers also need to be mindful of complying with existing legal obligations.

    Relevant considerations will be:

    • Ensuring your workers are taking at least their statutory minimum holiday. As outlined above, employers must able to show that they enable their employees to take annual leave by demonstrably giving them the opportunity to take leave, encouraging them to take leave, and informing them in good time that, if they don’t take their leave by the end of the leave year, they will lose it. When holiday is “unlimited” workers will be given increased flexibility to take leave as and when it suits them, so it will be important to keep track not so much of their unlimited leave, but their core statutory leave. Despite the presumption that employees will take more than their statutory minimum some employers’ such as CharlieHR have experienced some employees taking less.


    • Ensuring contracts are up to date and compliant. Employers should have a minimum holiday allowance which is based on the statutory minimum. Unlimited holiday should then be an add on with wording describing the additional discretionary leave under an “unlimited holiday” policy. Simply referring to holiday entitlement as “unlimited” in employment contracts risks falling foul of the Regulations. Having the unlimited element as a policy and subject to clear procedural requirements will allow for greater control on this element of leave which may well be needed once the policy is up and running.
    • Ensuring that workers are paid properly for the leave they take. The rules on holiday pay calculations are complex but, essentially, workers should be paid the same during statutory holiday as they would if they were working, so as not to deter them from taking leave. Employers should be clear on how the unlimited leave pay will be calculated to ensure compliance with these rules.
    • Considering the interaction with carry-over and periods of maternity leave, sick leave etc. and how this might impact your business and staff. A cap on carry over will be necessary to avoid an unquantifiable amount of leave potentially carrying over, reference to the statutory holiday entitlement will avoid ambiguous carry over arguments.
    • Discrimination risk – if it’s going to be up to line managers to make decisions on unlimited holiday requests, there may be a discrimination risk depending on how decisions are made. Providing training and ensuring you have a clear policy and criteria in place will mitigate this risk.

    For unlimited holiday to be more than a gimmick it will have to be properly implemented within a workplace culture of trust, loyalty and fairness. Employers will have to make decisions about agreeing to holiday on a potentially much more regular basis and so training will be crucial to ensure that they weigh up the needs of the business, its workforce and the needs of the employee. There are other ways to enable employees to take care of themselves, such as sabbaticals, flexible working, hybrid working, home working and sickness policies that enable sick employees to take paid time off without falling immediately to SSP. Nonetheless, it may provide another attractive way to recruit and retain the best talent in a competitive environment.


    Some pro’s are:


    • Wellbeing – providing employees with the ability to take time off without worrying about their holiday allowance could improve work/life/family balance. If employees don’t have to worry about their annual allowance they can take time off as and when they need it rather than continuing to work when they need a rest. Employees who are able to manage their work with other personal commitments may feel more empowered to manage their own workload, which may help them to feel more trusted, valued, and respected. More autonomy may result in better output. Some employers who have successfully implemented a policy like this have reported that staff are happier and more productive.
    • Recruitment and retention – offering unlimited holiday is a benefit that could help attract more talent to the business. Equally, it could also help retain existing employees if they are given freedom and flexibility and trusted to manage their own workload alongside their lives.
    • Improves productivity – Overwork and overly structured work can lead to stress, anxiety, depression and illness leading to sickness absence which can then detrimentally impact on productivity and financially damage a business in the long run. Enabling staff to take as much time off as they need, could help prevent this and could lead to fewer sickness absences.
    • Unlimited holiday doesn’t necessarily mean more holiday – it is not a given that employees with unlimited holiday will take more than the statutory holiday entitlement anyway, it just means that they can if they wish. This freedom may boost morale and give employees a sense of freedom. Certainly, the evidence so far is not that employees are abusing such a benefit. In fact, the opposite has been observed. Trusting employees to work as a team, to deliver their work and to be responsible for their workload and holding them accountable in this way seems to be a good check and balance on holiday absence. The key will be to ensure that performance measures are fair and not overly onerous and do not therefore operate as a fetter on an employee’s ability to take holiday, whether it is unlimited or not.


    Some cons:


    • The reality of fewer holidays – CharlieHR, who were one of the first to implement an unlimited holiday policy, have found that unlimited holiday policies resulted in fewer holidays being taken not greater. Too much choice can lead to no choice. Also, high performers will always perform highly and without a proper quota of holiday to take might not take any at all. A further potential problem, as with any discretionary benefit is that employees will be at the whim of their line managers and their workloads: some may feel too busy to take leave, whilst others will be deterred in the knowledge that they’ll have a mountain of work to return to. There is never a good time to take holiday for many. Management will have to lead by example in showing employees it is OK to take holiday indeed it is vital.
    • Giving a set number of days creates certainty and the idea of ownership – as CharlieHR observed if an employee is given a set number of holiday days they know they belong to them and feel no compunction in taking them. However, with no set number of days employee can be unsure what is the correct/fair or right amount to take. This can lead to employees not feeling confident to take holiday when they need it.
    • Additional strain on working employees – without very careful scheduling and planning large numbers of employees on holiday or lengthy absences will place increased strain on those employees still at work who will have to take on extra work to cover. If any group feels like they are always the ones carrying the can this will lead to lowered morale and allegations of unfairness. There will always be those who can afford to take more holidays due to their workload/role and those that feel they really shouldn’t take any. Personality types will also come into play with those more anxious/diligent employees taking less than those who are less committed or more relaxed.
    • Additional holiday will no longer be a reward – If holiday is unlimited earning additional holiday or days off in lieu will no longer be relevant. Such benefits have historically been a valuable perk, so if this is something an employer currently offers they will need to consider whether removing it will impact their overall offering.


    In unlimited holiday right for your business?


    If you are considering offering unlimited holiday you will need to give serious thought to how it will be implemented and whether it is likely to positively or negatively impact your business and indeed your employees. A good idea is to consult with your existing team to see what they think, after the initial “yes please” you may be surprised that what appears to be a no brainer might actually be less attractive than other options such as the ability to apply for paid sabbaticals; additional days as a long service benefit (subject to the Equality Act considerations) or other flexibility to allow employees to successfully weave their work lives with their personal ones.

    If you are considering offering unlimited holiday or any other new benefit call us we would love to help 0203 858 7965

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