Unlimited holiday allowance for employees has become a badge of honour amongst companies in Silicon Valley in recent years, with businesses such as Netflix and Virgin first establishing this novel concept. It has been associated with industries like tech and advertising, however recent times have seen a small but steady increase in UK based employers choosing to add this “perk” in order to attract new talent and reward loyal employees, even in more mainstream businesses.

This represents a shift in the value exchange between employers and employees. Employers today are not always able to give employees the same financial rewards as they once were and have to be more creative with the packages offered to employees. 

The success or otherwise of such a policy is undoubtedly linked to the culture of the organisation and it is vital that careful consideration is given to both the likely impact of such an approach on the business and to the legal ramifications. Whilst it may be some time before such a practice becomes commonplace in Northern Ireland, here we briefly consider some perks and pitfalls as well as key legal considerations for employees and employers alike.

The Perks

The idea of unlimited holidays is undoubtedly attractive for any employee who struggles to manage their annual leave. For a range of reasons, such as family/ caring responsibilities, health issues, other commitments/ aspirations in life, or an increased need/ desire to travel as the world becomes smaller; employees often struggle to stay within their holiday entitlement. For this reason most employees would welcome the opportunity to avail of further time off when they need it. They might feel empowered and motivated if they knew they were afforded flexibility when taking holiday and information suggests that they work harder/ longer when allowed to avail of such a policy. With technology today, employees might be able to fulfil a life-long ambition to travel whilst also keep in touch with work in the evenings. The world is changing - and arguably employment practices should change too. “Work hard and take time off when you need it” is certainly music to the ears of most employees.  For some, however, in certain sectors, employees are not taking enough holidays due to increased work load and are “burning out”. It is hoped that such a policy would create a shift in culture and encourage employees to feel empowered to take leave.

But information suggests that employers may actually benefit as well.  Aron Ain, Chief Executive of Kronos Management Software Group, writing in the Harvard Business Review in 2017, states that employees took an average of 2.6 extra days off in the first year of the policy being introduced, said they were happier; voluntary turnover dropped and, it was the best financial year ever for the business.

The Pitfalls

Ain points out that employers must have “fundamental trust” in employees for such a policy to be effective. He adds that none of his employees abused the policy and no customer suffered. This may not be the case in every business and it is vital to assess the impact prior to introducing such a scheme.

Some have suggested that it actually leads to fewer holidays being taken and more spent working. It has been likened to the infamous “Facebook 5lbs”- the weight that new employees gain when they join Facebook and avail of the vast on-site catering service. Whilst it may sounds attractive, it has actually been said to lead to employees spending increased time at their desks and in this way likened to “the Emperor’s new clothes”.

The policy is normally applied in consultation with an employee’s supervisor according to their unique circumstances and work load. It is only “unlimited” within reason. Some have said it creates uncertainty for employees about how much time they are able to take and increased work for managers in managing requests.

What are the legal implications of such an approach in Northern Ireland?

• Under The Working Time Regulations (NI) 1998, full time employees are entitled to a minimum of 5.6 weeks annual leave - 28 days. Part time employees are entitled to pro-rata equivalent.
  
  
• It has been suggested that the introduction of an “unlimited holiday policy” might lead to staff taking fewer holidays. Beware of information from the USA, (where “unlimited holiday” originated) as it is the only major advanced economy in the world that does not guarantee workers paid holiday. Bear in mind that in Northern Ireland, there is a statutory minimum and employees must take their leave entitlement. Employees, even if they prefer, should not be paid for holiday rather than taking it if it means less than statutory leave, as this is a breach of the Working Time Regulations (NI) 1998.
  
  
• Undoubtedly, for such an approach to be effective, employers should carefully consider drawing up a policy and procedure, setting out the obligations and expectations on employees and employers when applying the “unlimited holiday” policy as they should with a range of work place practices. Reference should be made to the applicable law in any such policies and careful consideration should be given so that a fair, balanced and non- discriminatory approach is taken.

For queries relating to holiday or any other employment law issue, please contact Laura Banks on lbanks@fhanna.co.uk or call 028 9024 3901 for a no obligation discussion.