Executive Report

Pros and Cons of Unlimited Leave

The Covid-19 Pandemic has had a profound impact on the way American’s work. There has also been a shift in the labor market record number of employees resign and seek out new positions and employers. Employers are competing for talent and looking for new ways to stand out. One of the emerging practices is the offer of unlimited leave. For some, offering incoming employees unlimited leave is a practice so different than the standard capped leave that increases with seniority that it is difficult to imagine.

While only 4% of employers offer unlimited leave, the list includes high profile companies like Netflix, Sony, and LinkedIn. These companies have implemented unlimited leave as one of their strategies to attract and retain talented employees. Like many innovations, unlimited leave was introduced in sectors where competition for talent is fierce. Now, as a shifting labor market is making recruitment and retention more challenging, other sectors are looking at the practice.

We see unlimited leave as part of a human resources evolution that transforms the employee and employer relationship by both making employees more accountable and the workplace less rigid. Flexible schedules, remote work and unlimited leave all have the potential to deepen employee engagement, improve work life balance and enhance intrinsic motivation. Supervisors are not so much controlling day to day activities as setting the objectives and empowering employees to work when they work best.

The Covid-19 pandemic changed how many people manage their teams. Micromanaging and management by walking around just wasn’t possible during the pandemic. Instead, managers learned to focus on outcomes rather than time. For some organizations, this new way of working has set a foundation for unlimited leave policies. If you are considering switching to unlimited leave, there are some pros and cons to consider.

PROS

  • Paid unlimited leave communicates a deep level of trust in employees. This partnership is more attractive to employees than a control and permit based supervisory structure, especially to Gen Z and Millennial employees.
  • When a job candidate is choosing between two offers, unlimited paid leave could be the factor that tips the scales. Unlimited leave is an attractive benefit for employees in this highly competitive labor market where employers need to stand out.
  • Unlimited leave supports a healthy work life balance in which empowered employees have control over their leave and can meet the needs of their families.
  • Unlimited leave shifts the focus away from “punching the clock” and towards outcomes. This is good news for productivity. True performance outcomes are a better indicator of impact than time on the clock.
  • This structure reduces administrative burden of leave tracking and the booked cost of accrued leave because this is not an accrued benefit.
  • Employee engagement and satisfaction increases.
  • As the pandemic showed us, getting people to stay home when sick is important for a healthy workplace. Unlimited leave reduces the likelihood of employees working when sick.
  • When outcomes are professionally managed, most employees will not overuse leave.

CONS

  • In some organizations, employees feel pressured to take less personal time off because the culture encourages not taking leave. Employees will readily discern when an unlimited leave policy is out of alignment with expectations.
  • Some employees may take advantage of the program, taking far more leave than reasonable. Supervisors who rely on the attendance data to quantify productivity will experience challenges coaching employees for excessive leave. The key is to manage outcomes. Supervisors and employees alike will need have a clear understanding of the performance expectations of the position and rely on goal attainment and performance outcomes to manage expectations around leave.
  • A growing number of states are legislating additional protected classes of leave. Companies will need to research laws and regulations. Policy design and implementation should consider all regulated leaves there is no conflict.
  • Not all companies and/or positions are suited for unlimited leave policies. Teams that require on site attendance and a coverage ratio may be stretched thin by unlimited leave policies. If certain groups have access to unlimited leave and others do not, employee morale could be affected.

Companies making the transition to unlimited leave, should consider the following:

  • Companies that manage performance through goals outcomes will be better prepared to make the shift.
  • Supervisors must clearly communicate the leave scheduling process and expectations around job outcomes to ensure business objectives and coverage needs are met.
  • Policy documents, including the employee handbook, must clearly distinguish between unlimited leave and traditional accrued PTO (which has a cash value).
  • Consider partnering with a consultant to develop policies and procedures to ensure that unlimited leave works in concert with protected leaves like the Family and Medical Leave Act (FMLA) and other wage replacement benefits like sick leave or disability.

Contact us today to learn more about our customized benefits administration programs designed to meet your businesses specific needs.

Susan E. Manno, P.A. SCP, CEO & Director of Legal Compliance, TANDIUM Corporation

Executive Report

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