Is unlimited holiday an effective workplace benefit?

Emma Clark explains the challenges for businesses of providing unlimited annual leave for staff, as well as the possible alternatives

The concept of unlimited holiday for employees originates from Silicon Valley in the US and, at the time, attracted headlines for its radical approach. Companies were allowing employees to take as much holiday as they wanted, but usually with the condition that their work had been completed before their leave. The aim of such a policy is to create a relationship of trust, ensure employees feel more in control of their non-working life and to remove bureaucracy for the employer in overseeing leave arrangements. 

Not only is this perk seen as providing employees with more freedom, some companies may also benefit from potentially removing the need to reference accrual of holidays from P&L statements.

What does UK law say about unlimited unpaid holiday?

There is no statutory minimum level of annual leave in the US where the perk first appeared. By contrast, the UK has a minimum level of 5.6 weeks’ paid holiday (28 days per year) for a full-time employee under the Working Time Regulations 1998 (WTR). 

European case law (pre-Brexit) made it clear that an employee should not be prevented from taking their minimum level of leave and employers should encourage their employees to take their leave. 

Two 2018 cases determined by the ECJ (Kreuziger v Land Berlin and Max-Planck-Gesellschaft v Shimizu) went as far as to state that a national rule (for example, the WTR) that provides for an employee to lose their right to accrued holiday at the end of a leave year and not roll it over, may, in fact, be invalid if the employee was prevented from taking it by their employer. 

In light of these legal requirements, it is very challenging for employers to have a policy for which UK employees claim they have unlimited holiday. In fact, there is anecdotal evidence that suggests employees do not take anywhere near their statutory minimum level of leave when employers turn holiday from an annual legal entitlement into a ‘nice to have’ benefit.

In practical terms, many businesses may find it challenging to respond positively to requests for long holidays, particularly when they overlap with other employees’ requests. The issue can also extend to business culture, where staff are ‘always on’ and taking lengthy periods of leave is frowned upon. 

As a result, particularly prevalent in our current pandemic world, a rising number of employees are suffering from burnout and poor mental health. 

Unlimited holiday is simply not the reality. Employees are not taking in excess of (or even their entitlement to) their statutory holiday entitlement and even during allotted leave, are struggling to disconnect from work. 

What could employers do instead?

In light of the legal and practical ramifications summarised above, what could employers do instead of offering unlimited holiday?

  • Some employers are choosing to turn an unlimited holiday policy into a policy that provides a requisite minimum number of days that the employee is encouraged to take as leave (based on the WTR) and unlimited holiday on top. Such a policy should have clear guidance to ensure it is not abused and performance remains unaffected – some policies link any entitlement to unlimited holidays (in excess of the WTR requirements) according to the individual’s key performance indicators. The policy could also include a right to remove the unlimited holiday (again beyond the statutory minimum cited above) in the event of performance issues.

  • Some employers are designating days in the week that are free from video calls and others provide time off in lieu. 

  • There is increasing focus on flexible working for all employees, which will only increase this year, and continues to be an important recruitment and retention tool. 

Overall, it is clear that the concept of unlimited holiday could be an effective employee engagement tool. However, in practice, any policy needs to be crafted carefully and the starting point is to ensure that an employee is encouraged to take their statutory minimum holiday entitlements under the WTR with any unlimited holiday provided as an additional benefit.

Emma Clark is a partner at Keystone Law