Unlimited paid holiday – Is it really an employee benefit?

Following in the footsteps of American companies including Netflix and LinkedIn where unlimited paid time off is commonly and widely offered as a perk to staff, the UK has started to follow suit. Unlimited paid time off (UPTO) – Sound’s great, doesn’t it? But how does it work in reality? Are there more pitfalls than benefits?

Firstly, what exactly is unlimited paid time off?

As you probably guessed, it is the policy of allowing staff to take as much holiday as they would like and paying them for it.

In the UK, almost all staff who work a 5-day week must legally receive at least 28 days paid holiday per year (including bank holidays). However, according to the results in a survey undertaken by Glassdoor prior to the pandemic, only 43% of employees actually take between 91-100% of their holiday entitlement each year.

The idea behind UPTO is that employees choose how many days holiday they would like to take each year. But if not even 50% of employees are taking their current holiday entitlement now, then arguably, UPTO will not actually make a difference.

What are the pros and cons of UPTO?

Generally, the pros and cons could include the below:

Pros: Increased productivity, fully flexible working approach, increased trust culture, attractive staff perk and/or increased personal well-being of staff.

Cons: Unclear expectations, staff feeling under pressure in case they request ‘too much’ leave, policy abuse, staff taking too little holiday resulting in burn out and/or rifts with staff who take the most time off.

Overall, there are several pros and cons of UPTO, but the way it affects a business really depends on the specific employer and the industry they specialise in. Certain businesses will reap the benefits of UPTO much more than others. For example, if your business is filled with well performing staff who work hard and achieve their annual goals, then providing UPTO may simply increase productivity. However, as we all know, not all businesses are filled with well performing staff and even if they were, there is no guarantee that the business will remain the same for years to come. Therefore, if you are considering implementing a UPTO policy, it is strongly advisable that any performance, disciplinary and grievance procedures are also clearly set out and implemented first.

Is your business ready to implement an UPTO policy?

Do your staff have clear goals and objectives set? Do you trust your staff? Does your business have the right culture to be able to implement an UPTO policy? Do you have an annual performance appraisal procedure in place? And a disciplinary, grievance and performance policy to follow, should it be required?

If your answer is no to any of the questions in the paragraph above, then your business is likely not ready to implement an UPTO policy. Implementing an UPTO policy too early could mean that all paid time off requests are simply rejected, or only a small amount accepted and if that’s the case, there is little point in implementing the policy.

Ultimately, you need to experiment to find out what works best for your business but working towards the questions mentioned above is a good starting point.

How would it work in practice?

In reality, it is likely that most staff will take no more holiday than they currently do. In fact, it is highly suggested that UPTO would result in fewer holidays being taken, or a maximum of 28 days per year being taken. This is due to a number of reasons, including staff feeling pressure not to take holidays because they are worried about being perceived as abusing the policy or because staff are simply too busy. If staff have a target driven role, more holidays simply means more hours work to meet those same goals.

An UPTO policy will simply not work for every business. Each business should be assessed on a case-by-case basis to establish whether it could work successfully or not.

Can paid time off requests be rejected?

Yes. Technically, UPTO is not unlimited because employers can reject holiday requests in the same way they could if staff had 28 days of annual leave. Moreover, staff could not simply take every day off work – This would take you down a whole other rabbit hole and raise questions on their employment status.

Before implementing an UPTO policy, we would suggest considering other benefits than your staff may consider a perk. Given the current living costs crisis, it may be more beneficial for staff to receive a one-off payment to help with their bills, or a mental health paid day off.

Contact our specialist Employment solicitors

If you are considering implementing staff benefits, please do get in touch for advice. It is important that an accurate policy is drafted and circulated so that all parties understand the full terms and conditions of the benefit. Please email employment@ibblaw.co.uk or call 0330 175 7608.