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As attractive as it may sound, can both companies and employees really benefit from a flexible vacation policy? HR leaders share their views exclusively with HRO's Tracy Chan & Aditi Sharma Kalra.

The advance of technology has sped up the uptake of flexible working, allowing employees to get away from a nine-five office-based work-life, and instead be able to work anytime, anywhere, and everywhere.

The global pandemic over the last two years has further emphasised the importance of employee wellbeing, acting as a catalyst for the emergence of another new form of employee benefit: flexible vacation, unlimited leave, or unlimited paid-time-off (PTO) policy.

One of the recent examples of an employer adopting this policy is investment bank Goldman Sachs. According to Financial Times, the Wall Street bank adopted a new "flexible vacation" scheme effective 1 May 2022, allowing staff at the highest seniority like partners and managing directors to "take time off when needed without a fixed vacation day entitlement" in order to "rest and recharge".

As attractive as this perk may sound, can both companies and employees really benefit from such a policy? What are the concerns that companies consider when implementing such a policy? Let's find out in conversations with HR leaders.

Shift of power: From designated to self-determined

"Flexible vacation and/or unlimited leave policy is a new way forward," Connie Chua, Head of C&B APAC, Worldline Asia Pacific told Human Resources Online.

"The implementation of this new policy reflects the readiness of an organisation and leadership to engage a trusted and empowering culture."

Amidst the global pandemic, the way we work has changed tremendously, pushing business leaders to embrace new values and culture to attract and retain talent without compromising on productivity and customer experience.

Traditionally, employees, regardless of their job level, are entitled to a fixed number of leave days for each employment year. By implementing flexible vacation/unlimited leave, it gives employees more flexibility and control over their working schedule, so that they can take care of themselves and what matters the most.

"Shifting the responsibility of time-off applications to employees could potentially improve employees’ wellness and health as flexible time off can help prevent burnout and in turn increase productivity," said Chua.

And such flexibility, in the meantime, is especially attractive to the new generations of workers.

With Millennials and Gen Z employees taking up a significant proportion of the current and future workforce, how to attract, engage and retain this pool of talent, therefore, becomes a priority for management.

“This population appreciates mobility, flexibility, and the freedom of choice. It will be a culture shift and game-changer for the traditional organisation and leaders,” said Chua.

However, just like any other benefits, Chua cautioned this policy may backfire if it is not managed prudently.

"The downside of implementing this policy may well be that employees take the flexibility for granted and subject the policy to abuse if the workforce is not mature enough in handling the flexible time-off responsibly," said Chua.

To take or not to take: That is the question

Rajiv R, Chief Human Resources Officer, Ramco Systems, agreed there is an advantage to implementing an unlimited leave policy in terms of saving organisations money for any non-taken vacation days, however, he is concerned such a policy may bring in more cons than pros.

"Without a specific allotment of vacation days, there is no policy to encourage time away from the office. When everyone can take as much vacation as they want, it loses its appeal as a motivator," said Rajiv.

Under the fixed leave day system, employees can have a reasonable expectation of the frequency of time-off for their colleagues and themselves. However, when there is no clear guideline and limitation on vacation days, people may hesitate to enjoy what they are entitled to.

"Therefore, a major downside of implementing an unlimited leave policy is the potential for employees to be chastised for taking their vacation days. Without a definitive outline, it will be harder for employees to gauge how much vacation leave is actually acceptable," he explained.

"While some will be willing and ready to push the limits, others might choose not to use any leaves as a means to get ahead. If this behaviour is rewarded, then we are creating a company culture that does not encourage & value work-life balance."

Meanwhile, as the world is gradually picking up on track, Rajiv found it may not be easy for senior leaders to fully leverage this policy.

"It will be difficult at this point in time, as normalcy is just returning with reference to working from the office. No organisation can function smoothly when too many leaders or managers are absent at the same time. Decisions are delayed, meetings are postponed, and emails start piling up," he said.

A hierarchical privilege or universal benefit?

The implementation of flexible vacation/unlimited leave policy may bring out another issue: who is eligible? What are the criteria to determine the eligibility? Job title? Seniority? Or something else?

While it may seem like a progressive and employee-friendly policy, Rajiv remarked that it is risky if it is poorly documented.

"We are moving towards being more inclusive and an improperly managed unlimited leave policy can end up creating inequality," he concluded.

Having understood both the pros and cons of an unlimited PTO policy from HR decision-makers, the key things to look out for, in HRO's point of view are:

  • What is the objective behind the policy? Retention of young talent? Flexibility across the workforce? Or just another perk to boost the employer brand?
  • How well documented is the policy? Does it list out exactly who is eligible? Does it provide ballpark or benchmarked figures for the employees to have a rough idea?
  • Operational workflow management: How will the organisation ensure that productivity is not impacted, or there isn't a scenario where too many people in the same team or within the leadership are out of office?
  • Cultural stance: Are managers encouraged to support this policy or are there specific guidelines in terms of what is expected to be the norm for employees to avail this? How much leeway do they have in balancing time-off with business demands?

Photos / Provided (L-R: Connie Chua from Worldline Asia Pacific, and Rajiv R from Ramco Systems)

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