Why Unlimited Vacation Isn't Always a Good Thing
Life + Money

Why Unlimited Vacation Isn't Always a Good Thing


What if your boss said you could take all the vacation time you need?

Netflix, LinkedIn, Evernote and Pocket are among a small but growing number of companies offering workers flexible or discretionary paid time off. It sounds too good to be true, so is there really a limit to the "unlimited vacation" concept?

Rest assured, "no one is taking five months off," Gusto co-founder and CEO Josh Reeves told CNBC's "On the Money," in an interview.

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Formerly ZenPayroll, Gusto is a software company that processes payroll and benefits for more than 25,000 small businesses. How much vacation does Gusto give its 300 employees? "We don't actually track the exact time, but it ends up being in the range of four to five weeks," Reeves said.

That's more days off than most workers get. According to an Oxford Economics study, Americans are taking off nearly a week less than they did 15 years ago. The study also found workers took an average of 16 days of vacation in 2013, compared to 20 days off from 1976 to 2000.

The idea behind unlimited paid time off is you can take vacation as long as your work is done, and your boss approves. Other companies explained how their policies work, and insisted that it didn't lend itself to abuse.

"It's not a free-for-all," said Ronda Scott of Evernote, the note-taking application start-up. She says its time-off policy is "based on conversations with direct managers in a 'take what you need' fashion."

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Netflix told CNBC that because they "don't have a vacation policy" they "do not track time off." Marlee Tart explained that "It's part of our freedom and responsibility culture that we trust employees to balance doing a great job with having a balanced life."

And Kait Gaiss of Pocket, a Web page-saving app, says it has found its "unlimited vacation policy means people aren't spending time tracking their days, or worrying if they have enough time to take the vacation [or] break they need. They can just go."

But former human resources executive Cynthia Shapiro tells CNBC in an interview, that she sees unlimited vacation as a threat to traditional vacation policies. Shapiro says she's "afraid that this is part of the great shrinkage of employee benefits."

Shapiro, the author of the book "Corporate Confidential," says that it "started back in the '90's where they bought out everyone's pensions." At that time, "the new people coming in got no pensions. Then they went after work hours and then health insurance benefits."

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Shapiro warns that vacations could be the next benefit at risk. She tells CNBC, "I'm afraid that what this would eventually do is eliminate vacation time altogether for people."

Paradoxically, despite seemingly having the freedom to take unlimited vacation, Shapiro believes fear of losing your job and confusion about just how much time to take could make employees take off fewer days.

"Psychologically, employees don't tend to take vacation time when they don't understand or they're not feeling secure about the parameters," she said. "And vacation time [used] is already at its lowest point in the last 40 years."

Gusto's Reeves, however, thinks "in many ways that employee-employer relationship is evolving."

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He said, "It's much more about trust."

Reeves emphasized that his company "absolutely ... checks in on people if they are not taking enough (time off)."

"This isn't a formula," he said, "there's no right or wrong approach for each business. It has to be authentic to their values."

Reeves explained that Gusto has an additional unique perk to encourage employees to get away from the office. "On people's one-year anniversary we actually buy them a free plane ticket anywhere in the world," he said.

To make sure the worker actually takes that break, Reeves added that the ticket expires exactly one year later, on the employees' second anniversary. Everyone benefits after a vacation, Reeves told CNBC.

"We want them to take that step back, think more holistically about how they're working," he said. "They come back a healthier person, a healthier teammate as a result."

This article originally appeared on CNBC. Read more from CNBC:

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