Case Study: Kronos Unlimited Vacation Policy

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Kronos found the benefit in an unlimited vacation policy; can your organization? In this lesson, you'll learn more about the pros and cons of such a policy and early implementation steps to begin this type of system.

Kronos' Unlimited Vacation

How does unlimited vacation time sound? Pretty good, right? That's what the leadership at software company Kronos thought. Kronos' management implemented the unlimited vacation policy in an attempt to attract the best talent to the organization and to keep them once they had them. But, how exactly does it work?

Kronos took the approach that in today's digital age, its employees are never really ''off the clock.'' And, if an employee is never really off the clock, then the antiquated notion of two weeks' paid vacation no longer served the company's best interests.

The move to an unlimited vacation policy might seen like a natural progression toward employees abusing the system, but what Kronos found was that the time that was taken hit an average of approximately three weeks. Leadership at the company said the benefits of the policy, however, were far more important. Some of the benefits included employees who felt like they had greater flexibility in their roles, greater engagement and the company's best year of sales ever.

Kronos is not the only company to test out an unlimited vacation policy, though it is in the minority: Just one to two percent of all businesses have moved this direction, according to the Society For Human Resource Management. Netflix and Evernote are among those trying it.

Unlimited Vacation Pros/Cons

With any significant change, like a move to an unlimited vacation policy, there will be both benefits and drawbacks. Here are a few to think about if you're considering a move to free PTO.

Pros

  • Greater work-life balance for employees
  • Improved health and well-being
  • Developing an ownership mentality among workers
  • Enhanced employee engagement and loyalty
  • No added business expense in paying out unused PTO
  • Attracting and keeping the best talent
  • Trust increases from both employees to company and from company to employees

Cons

  • Burnout among employees who take less time off
  • Employees unhappy about losing accrued time or unused PTO payout
  • May not work for your company culture
  • Employees unhappy because everyone is on the ''same level'' regarding PTO, regardless of tenure
  • Lack of clarity about how much time off is appropriate
  • Fearful employees worried about losing their job or potential promotion opportunities
  • Potential to abuse the policy

Setting Up Unlimited Vacation

Implementing an unlimited vacation policy is all about transparency and clear communication. Here are some things to consider to begin such a policy.

First, communicate early and clearly with employees about a change coming to their benefits plan. Host information meetings and question and answer sessions to engage employees in the decision-making and implementation process. Use the feedback you receive as you structure your new policy.

Next, adequately train leaders, managers and human resources representatives well before the policy goes into effect. These are the workers who will be bombarded with questions from employees about the interworking of the policy.

Add it to your employee handbook. A written policy can clearly spell out the structure of your policy, rules that need observed (such as making sure multiple people are not off at the same time in the same department) and how to request time off. Be sure employees know who must approve their request.

Create a plan to document your unlimited vacation policy. Whether it's a company-wide computerized request or an approval from your department manager, create a paper trail that won't cause confusion for remaining employees. This will also allow you to track vacation requests and ensure people are using, and not abusing, the system.

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