Unlimited holiday: what are the pros & cons for SMEs?

Have you ever considered an unlimited holiday policy for your small business? Do you know what it entails - and what the pros & cons are?

Hailing from Silicon Valley in the US, unlimited holiday has gained attention for its out-of-the-box thinking.

In this blog, we get into the key information SMEs need to know about unlimited holiday. We spoke to Breathe Partner Jason Govindji-Bruce, CEO of NORI HR & Employment Law for his expert advice – especially as NORI offer unlimited holiday to their team as a benefit.

Jason offers a unique perspective on this policy, offering both a HR and business-owner perspective.

Skip to:

• What is unlimited holiday?

• Can you have unlimited PTO in the UK?

• How does unlimited holiday work?

• Unlimited holiday: pros & cons

• 5 alternatives to unlimited holiday

What is unlimited holiday?

Unlimited holiday is a policy where organisations don’t limit the number of days/hours employees can request off as paid annual leave – the amount of time they can take off isn’t capped at a certain number.

This means that employees can request as much leave as they like – and if it aligns with business needs and is approved, they can take the time off.

Can you have unlimited PTO in the UK?

Employees are legally entitled to 5.6 weeks of paid holiday per year in the UK.

It’s up to the employer whether they offer enhanced paid leave packages beyond this – something to bear in mind for SMEs considering implementing a policy.

How does unlimited holiday work?

We asked Jason how the unlimited holiday policy at NORI HR & Employment Law came to be.

“We found that our team needed additional time off – whether it was for personal reasons, or one of our team being in the army reserves. Essentially, it didn't sit right with us that people were reaching the end of their allowances and asking for unpaid time off – so we thought we’d try something different, to give back to our team.”

There are a few components needed for an unlimited holiday policy to be successful – and the main one is trust:

• Trust

Trust is the most important component when considering an unlimited holiday policy – without this, it simply won’t work.

“At NORI, we work on a basis of trust,” Jason explains. “You don’t need to explain why you’re late, sick, or why you need the time off – we trust that it’s legitimate and that you’re not making it up. Our team are adults, and we treat them like adults. We trust them to manage their workloads and take the time off that they need.”

• How unlimited holiday is managed at NORI

There’s a common misconception around unlimited holiday in the UK, Jason shares.

“People often ask if unlimited holiday means employees get 365 days off, and of course it doesn’t,” Jason clarifies.

“At NORI HR & Employment Law, we operate our unlimited holiday policy with the parameter that no one else can be off at the same time, which helps to protect the business.

If anyone else is off and you need the time off for a particular reason, we advise our employees to work it out amongst themselves.”

• A strategy for recruitment & retention

Jason also notes that the recruitment market is increasingly competitive, and unlimited holiday was a way of standing out from the crowd.

“We’re a small business and offering unlimited holiday has worked as both a recruitment and retention strategy. Looking at the average amount of time off the NORI team took last year, the least amount of time off someone took was 45.5 days – equating to 9 weeks’ holiday. Whilst we operate during bank holidays, that’s still a full 2 weeks of leave ahead of our competitors.”

The pros & cons of unlimited holiday

We know there are two sides to every story.

What works for one small business may not work for another – so we’ve collated the top pros & cons of offering unlimited holiday in a handy quick-reference table, before getting into the detail a bit later on:

Benefits of offering an unlimited holiday policy

In this section, we’ll get into the detail of the pros & cons of offering an unlimited holiday policy for SMEs:

• It’s easier to attract candidates – and retain employees

Offering an unlimited holiday policy can be a unique selling point for SMEs when recruitment & retention is tricky in the current economic climate.

In terms of employee engagement & standing out in a competitive job market, why wouldn’t you want to offer a benefit that means teams can have a truly good work/life balance, and manage their time off as needed? You’re basically saying ‘if you work for us, we’ll trust you’.

• Boosted morale

Jason shares how everyone has benefitted from implementing an unlimited holiday policy amongst his team of 9. “Clients are happy, our staff are happy and the work is getting done. Our team are happier not having to penny-pinch holiday days any more.” Sounds like a win all around for NORI.

• Lower levels of sickness absence

A study showed that employees take 50% fewer sick days when unlimited holiday policies are in place. So if absence management is something you struggle with in your SME, this could be something to bear in mind.

The unforeseen nature of sickness absence means that NORI doesn’t offer paid sick pay. “As a small business, we can plan for & manage workloads around holiday, especially with one person off at one time. But sickness absence can’t be planned for, so this isn’t something we pay.”

Given the unlimited holiday policy NORI has in place (and the data), it’s likely that sickness absence rates will be lower, anyway.

• Increased productivity

As long as you maintain service level agreements and meet deadlines, clients, employees and business owners alike should be happy.

If employees are content with the benefits they’ve got, productivity will ultimately increase.

• Saving time for HR & managers

If HR (or managers) aren’t spending time reviewing holiday allowances and approving leave requests, this gives them time back in their busy days.

“[Having an unlimited holiday policy] has made our lives easier as business owners – we don’t have to micro-manage the team - just check no one else is off, and that’s it,” Jason reveals.

Challenges of unlimited holiday for SMEs

• Keeping burnout at bay

Some employees may fear utilising an unlimited holiday policy to the point where they’re at real risk of burnout for not taking enough leave.

Luckily, with Breathe’s burnout monitor tool* you can keep track of how much leave your team are taking, and who might be at risk of burnout – to help keep it at bay.

*Available on Regular Breathe plans & above

• Balancing the needs of the business

Ultimately, your small business comes first – so does the work, over implementing additional holiday policies. If your team are stretched, unlimited holiday isn’t going to be top of your to-do list.

Jason acknowledges the likelihood of unlimited holiday becoming the norm in the UK. “It would be nice if every company implemented unlimited holiday for the massive work/life balance benefits, but unfortunately it’s unlikely to become the norm.”

• The cost of unlimited paid holiday

If all unlimited leave is paid, this could result in a hefty payroll bill for SMEs. But there are different ways to keep costs down.

If you were considering offering unlimited holiday, you could always consider a cap on paid holiday - and if employees needed additional time off, this would be unpaid. Find out more about different types of unpaid leave in our blog.

• Managing the worst-case scenario: employees taking too much leave

You might be concerned that a few of your employees might abuse such a generous policy, and ruin it for everyone. This might be the case, and you can set rules around the policy as necessary to protect your business.

But if this is something that worries you, here’s some food for thought: HR trailblazer & performance pioneer Lucy Adams discusses policy-making for the many, not the few ‘bad apples’ in this blog.

• Creating a fair policy

Creating parameters like Jason has at NORI HR & Employment Law can be a challenge. But it’s not impossible. Setting the boundaries that you need to ensure business as usual continues and your services aren’t disrupted is feasible, once you work out what those are for you.

Perhaps, like Jason, you simply need to ask your team to ensure no one else is off at the same time as them and that their work is covered.

Even if unlimited holiday isn’t the right option for your SME, maybe you can consider extending your holiday entitlements to boost morale & employee engagement.

5 alternatives to unlimited holiday

Here, we’ll detail other ways of giving back to your team as part of a people-first culture (if unlimited holiday isn’t the right choice for you).

1. Enhanced leave allowances

You might prefer the option of giving your team more leave than you currently do – whether this is already above the statutory minimum, allowances can always be enhanced if you prefer stronger limits on the amount of time off your employees can take.

You might also find that offering a certain amount of paid holiday plus additional unpaid holiday could be an option. Read our holiday management guide for more information.

2. Duvet days

Some companies offer ‘duvet days’ – what about offering your team one day a year where if they need to, they can use a ‘duvet day’. This isn’t sick leave or holiday, but more a day of deep rest, when needed.

3. Focus on employee wellbeing

Perhaps you can offer an Employee Assistance Programme, or even a private healthcare plan. There are many different ways you can support employee wellbeing, if this is something you’d rather focus on for your team.

Find out more about the types of support SME employees really want in the wellbeing edition of our People First Culture Series.

4. Sabbatical policies

Sabbaticals allow people to have a period of unpaid time off, and a job to return to after a certain number of months. This is common when employees want to take a prolonged period of time off for travelling.

5. Additional business benefits

Some businesses offer focus days for their employees for uninterrupted focus time, where meetings aren’t allowed to be scheduled. These are sometimes called ‘deep work Wednesdays’ or no-meeting days.

At Breathe, we try to have ‘no-meeting Fridays’ so that this day can be spent in deep work (or catching up after a week of meetings). Whatever you might want to offer your team, we can almost guarantee you’ll see productivity benefits – and your team will thank you for it.

The role of trust & autonomy in your holiday policies

We’ve listed the pros & cons for small businesses considering an unlimited holiday policy. It really boils down to the trust and autonomy in your small business.

But we wanted to know what advice HR expert Jason Govindji-Bruce could offer SMEs on this topic:

“If you’re considering offering unlimited holiday, it’s a big deal, so make sure you shout about it. Small businesses should be proud to give back to their staff if they can.

The whole premise of unlimited holiday is housed in the foundation of trust. It has to be used and implemented in this way, too – it can’t be a gimmick or a quick splash across LinkedIn or the local press – make sure you’re giving back to your team for the right reasons. You’re essentially saying you’re really trusting them.”

Find out how Breathe can help you manage your team’s holiday with our streamlined staff holiday planner.

Jason Govindji-Bruce is the CEO of NORI HR & Employment Law, who are Partners of Breathe.