Should Firms Provide Unlimited Vacation Time?

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"That's easy, of course they should," responds every worker everywhere. Unlimited vacation time sounds lovely in theory from the worker perspective but probably not as great from the employer perspective. After all, there's some moral hazard there: if you can take unlimited vacation time, then wouldn't you spend a lot more time out of work than you do now? Wouldn't productivity decline and profits plummet?

Katie Morell writing for for American Express Open Forum, provides several examples of firms that have successfully implemented such a policy. Here is one tech company owner, Blake Shipley explaining:

In practice, Shipley claims most CoupSmart employees end up taking around two weeks vacation anyway, but like knowing there is an option for more.

"One of our employees is taking three weeks off this year because he has a fiancé in Paris," he says. "He ends up mixing vacation with work and gets everything done on time, so it isn't a problem."

How does this model benefit the business owner?

"It's all about incentives," Shipley says. "I've found that when you give people the right incentive, they find better and more efficient ways to do their work. It gets people to think about what they need to do to fill their personal desires."

Of course, there are situations where unlimited time-off arrangements like this simply wouldn't work. The article points out such examples, like in manufacturing where workers must be present as an inescapable characteristic of their job.

In general, though, it doesn't sound like the "unlimited' aspect of the vacation time is really what matters here. In the examples that Morell provides, all the business owners say that employees can't abuse the system, so they generally take only a few weeks per year. Of course many firms provide a few weeks per year vacation time already.

So really the advantage here may be the flexibility in vacation time instead its being "unlimited." Telling your workers that you can take your vacation whenever you want, so long as you get your work done would presumably provide precisely the same outcome.

If that wasn't the case, then you'd have a situation where workers were taking several months of vacation time per year at the firms offering unlimited time. And if they're still getting all of their work done under that circumstance, then the employer might want to think about beefing up their job responsibilities or lowering their salary to that of a part-time worker.

Read the full story at American Express Open Forum.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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