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Unlimited Holidays

The concept of unlimited holidays for employees originates from Silicon Valley in the US and, at the time, attracted headlines for its radical approach. Companies were allowing employees to take as much holiday as they wanted, but usually with the condition that their work had been completed before their leave. The aim of such a policy is to create a relationship of trust, ensure employees feel more in control of their non-working life and to remove bureaucracy for the employer in overseeing leave arrangements.

There is no statutory minimum level of annual leave in the US where the perk first appeared. By contrast, the UK has a minimum level of 5.6 weeks’ paid holiday (28 days per year) for a full-time employee under the Working Time Regulations 1998 (WTR). European case law (pre-Brexit) made it clear that an employee should not be prevented from taking their minimum level of leave
and employers should encourage their employees to take their leave.

In light of legal requirements, it is very challenging for employers to have a policy for which UK employees claim they have unlimited holidays. In fact, there is anecdotal evidence that suggests
employees do not take anywhere near their statutory minimum level of leave when employers turn holiday from an annual legal entitlement into a ‘nice to have’ benefit.

The unlimited holiday is simply not the reality. Employees are not taking in excess of (or even their entitlement to) their statutory holiday entitlement and even during allotted leave, are struggling to disconnect from work.

What could employers do instead?

In light of the legal and practical ramifications summarised above, what could employers do instead of offering unlimited holidays?

• Some employers are choosing to turn an unlimited holiday policy into a policy that provides a required minimum number of days that the employee is encouraged to take as leave (based on the
WTR) and unlimited holiday on top. Such a policy should have clear guidance to ensure it is not abused and performance remains unaffected – some policies link any entitlement to unlimited
holidays (in excess of the WTR requirements) according to the individual’s key performance indicators. The policy could also include a right to remove the unlimited holiday (again beyond the statutory minimum cited above) in the event of performance issues.

• Some employers are designating days in the week that are free from video calls and others provide time off in lieu.

• There is increasing focus on flexible working for all employees, which will only increase this year, and continues to be an important recruitment and retention tool. Overall, it is clear that the concept of unlimited holiday could be an effective employee engagement tool. However, in practice, any policy needs to be crafted carefully and the starting point is to ensure that an employee is encouraged to take their statutory minimum holiday entitlements under the WTR with any unlimited holiday provided as an additional benefit.