Can Unlimited Leave Lead to Happier and More Productive Employees?

Person sitting at home with a dog by their side and their legs up on the windowsill

Enjoying a statutory minimum of 20 paid annual leave days, Aussie workers fare pretty well when it comes to their access to some much needed rest and relaxation. This is compared to our working counterparts in the US who, in the absence of minimum leave entitlements, typically receive only 10 days paid holiday every year – courtesy of their employer.

So, with Australians having a global reputation for a laid-back attitude to life in general, you might expect to hear we’re burning through those leave days, grabbing every opportunity to take a well-earned break from work. But you’d be wrong. A Roy Morgan study revealed Australia’s paid workforce had banked up almost 134 million days of unused annual leave – quite alarming for a country of only 24 million. In fact, this amounts to an average of 16 days per worker according to the report.

But just when you might think failing to take holiday is a completely inexplicable professional offence, it turns out there are a few common reasons why Aussies aren’t taking full advantage of their entitlements. A report produced by The Australia Institute found 12% of workers with unused leave felt guilty about taking it, 26% had too much work to do, 31% didn’t feel they needed it, and 33% said work was too busy for time off.

What’s the cost of not taking leave?

Reasons and excuses for not taking leave might be in plentiful supply, but are we at risk of overwork and what’s it costing us?

Annual leave plays an essential part in how we recharge and recuperate to stay healthy, maximise productivity and maintain morale. Without it, workers are undoubtedly placing themselves on the fast track to ‘burnout’ – a work-related stress condition that’s now recognised by the World Health Organisation (WHO). The WHO describes burnout as a “state of physical, emotional and mental exhaustion that results from long-term involvement in work situations that are emotionally demanding”.

Aside from the economic effects of overwork such as decreased work performance, more mistakes and absenteeism, workers who continue to underestimate the value of taking time-off work could also be putting their longer-term health at risk. A recent study suggests workplace stress carries similar health risks to second-hand smoke and estimates a 20% increase in mortality as a consequence of working long hours.

Could open leave policies provide the solution?

Recognising the many health and productivity benefits of paid annual leave, some employers are starting to experiment with the concept of unlimited annual leave in their attempt to ensure employees take sufficient leave while getting the job done. As the name suggests, unlimited leave (or open PTO as it’s often referred to in the States) is simply where employers don’t cap or record the number of leave days taken by their employees.

While it emerged as a novel idea propagated by companies such as Netflix and Virgin Group several years ago, it’s now said that 1 to 2% of US companies offer unlimited leave. Here in Australia, well-known companies such as eHarmony, Inventium, Hawker Britton and Student Flights are also offering similar leave policies.

Understandably, straying from the traditional capped leave policy could raise fears of abuse and a downturn in productivity for some business owners. Meanwhile, some reports suggest unlimited leave can actually lead to employees taking less time off due to feelings of guilt and internal competition.

The gift of uncapped holidays by itself might not solve Australia’s leave-hoarding problem – it should come hand in hand with a workplace culture and leadership team that shifts its mindset from the structured approach to one that actively encourages adequate time off.

While Netflix CEO, Reed Hastings, is vocal about his reasons for taking 6 weeks leave every year, Australia’s Inventium founder, Amantha Imber, told HC Online that unlimited leave should tackle work-life balance issues in the workplace.

“It’s not good for your health if you’re just banking up all of your annual leave. Because it’s unlimited, it’s not like you need to save your annual leave now to take a really big holiday,” Amantha told HC Online.

51 per cent of Australians are said to be storing their leave for later use

And Amantha makes a valid point. With as many as 51% of Australians said to be storing their leave for later use, unlimited leave could avert instances of overwork which are a side effect of Australia’s leave accrual system. While Australians must work for a period of time before substantial leave is available, by contrast, it’s common for UK employees to be given 5.6 weeks leave (including public holidays) right from day one of their employment.

The benefits of unlimited leave policies

Two years ago, Indeed began offering employees unlimited leave with successful results. While the organisation experienced a 20% year-on-year increase in leave days taken, 2017 saw an incredibly productive year with record company growth. What’s more, Indeed enjoys low attrition and high levels of employee engagement.

In addition to encouraging employees to take deserved time off, unlimited leave policies could offer benefits beyond a healthier workforce and increased productivity. These could include:

  • Improved morale – Employees will feel trusted and respected by employers while enjoying an overall improved sense of worth. This results from a more entrepreneurial approach to achieving objectives which encourages employees to manage their time and and take leave according to their own schedules and judgment.  
  • Gaining a competitive edge when hiring – Indicative of a better work-life balance, employees rank unlimited time off as one of the best employment perks.  
  • Attracting the Millennial workforceFlexible working is said to be important to Millennials’ working lives and is linked to improved company performance, personal benefit and loyalty.
  • Reduced costs – Money is saved when a company doesn’t have to track unused leave as a liability.

Unlimited annual leave might not work for everyone and there are many factors to take into consideration. Some businesses however, have shown it can work when implemented in the right way and for the right reasons. For companies whose employees are contributing to Australia’s mountain of unused leave, uncapped time off could be an effective initiative for avoiding the risks of overwork and promoting a healthier and more productive workforce – provided the workplace culture supports and respects it.

And remember, it all starts at the top.

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