Should You Offer Employees Unlimited Vacation Time?

kathryn by Kathryn Hawkins on January 31, 2012

So you’re thinking about offering your employees unlimited paid vacation time. Will you end up managing the office alone while your entire staff suns itself in Aruba? Not likely.

Although providing unlimited paid vacation may seem like a risky move, a growing percentage of companies — Best Buy, IBM, and Netflix, among them — are turning to this benefits model, which doesn’t guarantee or track the number of days that workers take off but does require them to get the boss’s permission before they go. Netflix says it stopped tracking workers’ time because it was more important to “focus on what people get done, not on how many hours or days” they work, The Wall Street Journal reported.

Smaller businesses — such as Red Frog Events, WeddingWire, HubSpot, and Bazaarvoice — also follow the innovative model, measuring employee performance through goals and achievements vs. time on the clock.

Here are some benefits of offering unlimited paid vacation:

Recruiting advantage. Let’s say you can’t cough up top-dollar salary packages for your staff. A benefit like unlimited paid time off will make job applicants drool. “We hire a mere one out of every 750 applicants at Red Frog,” CEO Joe Reynolds told Inc.

Lower turnover. Flexible schedules can boost staff morale and foster company loyalty. When Dallas-based tax-services company Ryan switched from a traditional vacation schedule to flexible time off in 2008, annual turnover dropped from 18.5 percent in 2007 to 6.8 percent in 2010.

Employee responsiveness. Employees who aren’t required to sit at their desks from 9 to 5 every day are likely to be more helpful when you need them, no matter where they are. Steve Swasey, a Netflix spokesman, told The Wall Street Journal that he checked in with the office while he was on vacation in Africa.

No time-tracking hassles. It can be difficult for small businesses — especially those that are too small to have dedicated human resources departments — to track of each worker’s absences throughout the year. Unlimited paid vacation frees you from maintaining detailed data about people’s time on and off the clock. However, you may still need to schedule employee vacations so that they don’t overlap too much.

Increased productivity. By training your employees to focus on meeting milestones and deadlines instead of paying attention to how many hours they’ve worked, you’re likely to see them improve their time-management skills. “I think Red Frog is more productive by giving unlimited vacation days,” Reynolds told Inc.