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By LegalEdge News

The limited benefits of unlimited holiday

Unlimited holiday

Offering unlimited paid holiday has been popular for a few years now, especially among scaling tech companies and start-ups. 

One such company was Charlie HR, who offered it for three years before realising it was having unintended consequences and reversing the decision. It seems the practical reality is that it’s not the nirvana that was first imagined. 

Ironically, there’s anecdotal evidence that telling people they can have as much time off as they want can result in some taking less, so a policy motivated by the wellbeing of staff can end up doing more harm than good.

It’s also worth noting that giving a small team in a start-up autonomy over when they take time off is one thing. But extending this to the entire workforce of a larger, scaling business brings challenges – both practical and legal. 

You can read about why unlimited holidays didn’t deliver for Charlie HR in their candid blog.

Here are some legal considerations from our HR Legal Counsel team:

  • Full-time UK workers are legally entitled a minimum of 28 days paid holiday a year – and employers must make sure they are able to take this.
  • Unlimited holiday rules can cause stress to those who are unsure if it is really ok to take leave and/or feel under pressure not to take time off because others haven’t. 
  • An unlimited holiday policy might risk being indirectly discriminatory if some groups use (or can use) it less than others.
  • Some might try taking too much time off – which can put a significant burden on those covering for them. 
  • You could end up spending a lot of time and effort trying to regulate staff behaviour around the rules and managing expectations. 
  • When people leave, they must be paid for accrued but untaken holiday. So this could cause huge problems if their employment documentation doesn’t deal with this properly (i.e. that statutory annual leave and unlimited holiday are two separate concepts).

What are you trying to achieve?

Offering benefits to attract and retain the best talent is key. And while unlimited holiday rules might look like a positive way of meeting these aims, you should be asking:

  • What are we trying to achieve? (e.g. staff well-being, better engagement, an attractive place to work, retention, etc.)
  • Is it having that effect?
  • Is there another/better way to achieve it? 

Alternative options

Consider increasing the contractual holiday entitlement. From your team’s perspective this sets a benchmark that applies to everyone, gives them certainty and allows them to plan. It also means they are more likely to take their allotted time off, reducing the risk of breaching working time requirements. A generous holiday benefit is also a plus from a recruitment and retention point of view.    

Other alternatives include providing more generous paid parental leave, hybrid working and/or more flexible working hours, all of which have been shown to increase retention and recruitment interest.

How can we help?

At LegalEdge we advise on the best way to meet your business objectives and help you create policies and contracts that deliver. Please get in touch if you would like help with this and/or to discuss our HR training.

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