Is unlimited vacation 'a ruse' offered by employers?

Policy may see employees taking fewer days off, says HR academic

Is unlimited vacation 'a ruse' offered by employers?

No, unlimited time off is not an ideal benefit offering for employees, according to one academic.

If anything, this is a ruse used by employers to make the company more valuable, says Peter Cappelli, an academic at the University of Pennsylvania and director of Wharton’s Center for Human Resources, in talking with Canadian HR Reporter.

“In most organizations, accountants require that companies account for the liabilities that are created by vacation time and sick leave. And what that means is the employer owes it to the employee to serve so many days per year. And that is a cost to the organization: you're paying them when they're not going to be there.

“If you're an employer and you wanted to instantly improve how you appear on financial accounting, if you dropped vacations – which are accrued – you drop that liability on your balance sheets, and suddenly your company is more valuable. In a snap of the fingers, your liabilities fall, and the value of your company goes up.”

Unlimited paid time off (PTO) may be more of a hassle than it’s worth, according to a previous report.

Taking away employees’ right to vacations

However, offering unlimited PTO effectively eliminates workers’ legal rights to take vacations, says Capelli.

“What does unlimited vacation do? It just moves it from your legal right to a kind of implicit promise, or maybe explicit promise – depending how you want to view it – to be able to take off the vacation time that you need. 

“Now, nothing prevents an employer from stopping you from doing that. It's not a contract you have with the employer, and nothing prevents the employer from making it difficult for you to take that time off, or even holding it against you on your performance appraisals and other things.”

There’s also “some evidence” that when employers move toward unlimited vacation days, employees take less time off, says Capelli.

Not even half (47 per cent) of respondents to a previous study say they avoid work entirely while on vacation.

Health, mental health and unlimited PTO

There’s also the aspect of health and mental health when it comes to unlimited PTO, says Capelli.

“Right now, with this unlimited vacation, where [workers] don't have any right to take it… it's difficult for the employees to actually take it. So they're going to do less of it. 

“And they're probably going to be more stressed out about it. Because there are times when they really need vacation time when they might feel they can't take it… What you really want to avoid is people coming to work sick, especially in a context where people could be sick and it's hard to know when they're really sick.”

Companies need to ensure that their teams are actually taking time to step away, according to a previous report.

“If you want people to have time off, you should give them regular accrued vacation days,” says Cappeli.