Just as
employers are generally free to set an accrual method that best suits
their organizations’ needs, employers also have wide latitude in other
vacation policy areas.
In recent
years, a growing number of employers have begun thinking outside the
traditional idea of “2 weeks’ vacation” and, instead, have experimented
with different vacation arrangements as a strategic tool—a tool to
improve competitive recruitment, to reduce turnover in newer hires,
and to find the perfect balance of regular work with regular rest
and rejuvenation to keep employees engaged, passionate, and focused.
One trend
in vacation and paid leave policy is the idea of open leave, sometimes
also referred to as flexible leave or unlimited vacation. An unlimited
vacation policy is just that—unlimited. Rather than have employees
earn a maximum number of days off per year based on tenure with the
organization, employees with open leave are permitted to take all
the leave they need, for any reason, as long as their work gets done.
Leave requests are typically subject to each employee’s immediate
supervisor’s approval.
Though
it may sound like a recipe for employee abuse and an understaffing
disaster, employers often derive considerable benefit from unlimited
vacation policies as there is no responsibility to track accrued leave—and
generally no liability to pay out such accrued leave as wages upon
an employee’s departure from the organization. The concept can also
be quite attractive to new hires, who no longer have to put in several
years of tenure with the company in order to comfortably take time
off without fear of running out. (On the other hand, longer-tenured
employees may resent a shift to an unlimited vacation policy.)
However,
one downside to unlimited vacation can arise in an unexpected way—when
employees are no longer earning or accruing vacation hours as part
of their regular pay, workers may lack an idea of how much “unlimited”
time is reasonable to take, so they actually take fewer days
off. Similarly, when vacation time is “unlimited,” employees and managers
alike can lose the sense of respect for and entitlement to time off,
defeating the purpose of a restful reset away from the office. In
many cases, the hardest-working employees—the ones most in danger
of leaving and most in need of time off—will be the least likely to
unplug.
For these
reasons, some employers that have tested unlimited vacation policies
have later reverted to the accrual method, finding that the unlimited
vacation option didn’t achieve the intended goal. Of course, other
employers have successfully adopted unlimited vacation and have enjoyed
the ease of administration it provides.
If considering
this type of policy in your workplace, it is important to train management
on the benefits of vacation and to ensure that vacation requests are
approved fairly and consistently. Some employees will request, and
receive, more time off than others—this is unavoidable—but it’s critical
that all employees be assured a reasonable, uninterrupted break away
from the workplace in order to remain engaged and focused.
Employers that incorporate vacation policies into a flexible
benefits plan may allow workers to “sell” vacation days in exchange
for other benefits or “buy” vacation days by giving up other benefits.
For instance, an employee with a working spouse who has
good medical coverage might give up some of his or her medical insurance
in exchange for an extra week’s vacation. Or an employee with small
children might “sell” back some time in exchange for a childcare subsidy.
There are endless possible combinations, and employees like the freedom
of choice.
While a benefits program of this kind can be difficult
to administer at first, if structured correctly, it may come at little
additional cost to the employer. On the other hand, as noted above, it is very important
for employees to take vacation time and use it to rest and recover
and not think about work; employers should encourage them to do so.
Some employers,
particularly in manufacturing industries, may impose a period of mandatory
vacation—often without pay—to serve business operations needs.
For example,
some manufacturers will shut down all line operations for 1 week or
2 in the summer and/or winter months to allow equipment maintenance,
retooling, updates, and other operational needs. Similarly, some small
businesses may find it more cost-effective to close entirely during
holidays or times of low revenue. Mandatory vacation without pay may
also be a means for employers to reduce corporate costs without resorting
to layoffs.
The details
of these mandatory vacations, shutdowns, or furloughs will vary based
on the reason and organization. Some employers require only a few
days, some make the unpaid leave program voluntary, and some ask employees
if they are interested in taking the summer off—without pay, but with
benefits and guaranteed return to their jobs.
These
types of leave are permissible as long as they are administered in
a consistent, nondiscriminatory way. Still, employers
that wish to force leave must be sure that no conflicting policy or
agreement prohibits the company from designating leave time.
Many employers have adopted combined Paid Time Off (PTO)
programs in the interest of cutting down on unscheduled absences.
A PTO program combines paid days off, which would otherwise
be set in fixed allotments (i.e., vacation, sick time, personal days,
and holidays), into a single bank or pool. Employees may then take
as many days as they need, within the employer’s cap or limit, for
any reason. The concept of a specific number of sick days or vacation
days is omitted; the employee does not have to make a choice between
leave types, and the employer does not have to determine whether an
employee’s choice is legitimate.
PTO leave banks may be fashioned in any number of ways.
Some questions the employer should consider include:
• What types of absences will be included? For example,
will the absences include simply sick, vacation, and personal time,
or will jury duty, educational time, and funeral leave also be included?
• If PTO will include sick
leave, does the combined leave provided satisfy any applicable state
or local paid sick leave minimums?
• How many days will be available?
• What happens to unused leave at the end of the year?
• What happens when an employee terminates with time remaining
in the bank?