The Logic of Unlimited Leave

The Logic of Unlimited Leave

Writing at Quartz, TalentSmart president Travis Bradberry connects the reasoning behind unlimited leave to the “participation economy,” in which professionals are increasingly evaluated and paid according to the work they produce, rather than the hours they spend in the office doing it. Bradberry argues that companies such as Netflix that have adopted unlimited vacation policies have done so to cancel out the demotivating effect of forcing employees to put in a certain number of hours at work every day, week, and year no matter how much work they have to do or how long it takes them to do it. To support his argument, he points to one company that adopted unlimited leave long before it became a trend:

While Netflix was one of the first notable American companies to take on an unlimited vacation policy, the idea didn’t start there. Brazilian company Semco has been quietly offering unlimited vacation for more than thirty years. After a health scare when he was just 21, Ricardo Semler, the son of the company’s founder, realized that the schedule he was keeping was slowly killing him, and that if it could kill him, then it could kill his employees too. So, he made the radical decision to do away with schedules, sick days, and vacation time.

Contrary to the prevailing worry that productivity would plummet, Semler found that employees actually became more productive and fiercely loyal, and when the employees thrived, the company did, too. When Semler first instituted this policy in 1981, Semco was just a $4 million company. It’s now worth over $1 billion.

Bradberry has a much more sanguine view of unlimited leave than those cynics who suspect it is just a ploy to get out of paying employees for unused vacation time (and indeed, for California employers at least, such policies do have balance sheet benefits for that very reason). The trouble, of course, is that companies that introduce unlimited leave often find, as Jacque Vilet pointed out at TLNT a few months ago, that it ends up discouraging employees from taking any leave at all, especially when leaders in these organizations don’t set an example by taking vacations themselves. That’s why Kickstarter abandoned its unlimited vacation policy in favor of giving employees a larger set number of vacation days. Vilet attributes this paradox to the phenomenon of “choice overload”; Bradberry acknowledges the problem but spins it more positively, writing that unlimited leave gives employees “such a strong sense of ownership and accountability that, like business owners, many end up taking no vacation at all.”

His solution? Use incentives to encourage employees to take vacation. As examples, he points to Evernote and FullContact, both of which offer their employees cash reimbursements for vacation expenses. Such incentives can also work for organizations without unlimited leave policies. In a recent op-ed at the Harvard Business Review, social psychologist Ron Friedman recommended this strategy as an alternative to unlimited leave, applauding companies that offer a fixed number of vacation days and incent employees to take them:

Among the early adopters of this approach is the RAND Corporation, which pays workers what amounts to a small bonus for going on vacation: on days when employees are on vacation, they earn time and a half. A useful (and considerably less expensive) alternative to this approach is the US Travel Association’s practice of holding an annual raffle for $500. To qualify, there’s only one requirement: employees must use up all of their vacation time in the previous year.