Oscar Hodgson: Is unlimited holiday really without limits?

For the Zoom-weary worker emerging from the depths of the Covid-19 (Coronavirus) pandemic, a holiday sounds like a fantasy. It is no wonder that mention of unlimited holiday captivates the most sceptical workers.

Imagine an unlimited number of days off each year, no holiday requests, and the ability to take it whenever and however you want. It sounds like a dream come true. But is there really such a thing as unlimited holiday?

The concept has its roots in the US, where it is a relatively common and popular employee benefit, largely because leave does not accrue in the US and does not need to be paid out on termination. It has recently been offered by a growing number of UK-based tech and start-up organisations.

Employers that have embraced this concept are often looking to recruit and retain the best talent, address mental health and prioritise wellbeing, boost productivity and embrace a flexible working culture, foster trustful relationships between employee and employer, and streamline internal approval and record-keeping.

By advertising holiday as a benefit, rather than a statutory right, it often means employees are inclined to take even less holiday than they normally would. The burden of deciding what unlimited means is shifted to employees themselves. How much is too much? Is it unfair if one employee takes much more holiday than another? Do we count how many days each employee takes?

In practice, a tightly-drafted policy is needed to provide answers to these questions. UK employers also need to demonstrate they are meeting their legal obligation to ensure employees have a minimum annual leave entitlement, and that they encourage employees to take at least this amount.

In the UK, employers need to consider practical and legal issues such as limits on the number of days that can be taken at one time and how holiday will accrue throughout the year. In the UK, statutory leave always accrues and will still need to be paid out when an employee leaves.

It is important to set out the basis of payment for any additional holiday given the complex holiday pay rules under the Working Time Regulations, whether carry over will be possible, how employees request holiday and whether a request can be rejected, and how poor performance will be managed if it is due to taking too much holiday.

In practice, a sensible approach could be to give employees a baseline holiday entitlement and then offer discretionary unlimited holiday on top. Or consider offering a limited, but more generous holiday entitlement as standard.

Oscar Hodgson is an employment associate at Taylor Wessing