After three years, we are killing Charlie's unlimited holiday policy for good. We've decided that offering teams an unlimited holiday allowance just doesn't work – but probably not for the reasons you think.
Ever since we founded the company in 2015, every single person working at CharlieHR has received unlimited, fully-paid holiday days – no matter your role, and no questions asked. That policy has been in place since Day 1 of the Charlie journey, and over that time we have flown the flag for unlimited holiday pretty passionately.
As a company we want to be at the forefront of reimagining work for the better – in some ways, unlimited holiday was that commitment made real.
And yet, we've always known that it is far from perfect. Over the last three years, we've seen up close the stresses and strains that come with the unlimited holiday system. Eventually we realised we needed to address those strains.
A couple of months ago, we decided to review that policy in depth, sitting down with our team leads to learn more about how it was affecting everyone at Charlie. I reached out to the COOs of over 50 other startups, asking them how they chose to run their holiday policies and why.
Our conclusion? Unlimited holiday doesn't work – but probably not for the reason you think.
But before we get down to it – some context.
How does unlimited holiday work?
When I say unlimited holiday, what I'm talking about is unlimited paid time off. I've seen a couple of other companies claim to have an unlimited holiday allowance when what they really mean is unpaid leave. Obviously, those two things aren't the same.
At Charlie, team members booked time off in the same way you would at any other business – it's just that there was no limit on their allowance for the year.
Why did we offer unlimited holiday in the first place?
When Rob, Tom and myself started CharlieHR in 2015, unlimited holiday just made sense to us. We really didn't care what an arbitrary number living on a spreadsheet (or now, in our product) told us about a person. We cared about what they did at work.
We want our team to deliver outstanding work, and we trusted them to take the time off they needed in order to get that done. They're all adults, and they are mature enough to know what that means for them.
Back then, there were already a couple of big companies doing unlimited holiday and their reasoning went along the same lines. Patty McCord, formerly of Netflix, is well-known for her focus on 'tolerating only fully-formed adults, arguing that as long as you hire the right people you don't need to worry about having rules in place.
The team will just run itself.
There's also an empowerment aspect to this. That wasn't immediately obvious to us from the start, but it became clearer as time went on – extending this amount of trust to our team invited them to take ownership of the company's future. It made it clear that Charlie wasn't just their employer, but something they were responsible for taking care of.
And finally... I've just always hated the idea of someone missing out on an incredible, once-in-a-lifetime experience because of a holiday allowance. That's just not what life is about.
So – that's where unlimited holiday came from. This is why it failed.
Why unlimited holiday doesn't work
Now, I know what you are thinking... and the answer is no. We aren't scrapping unlimited holiday because everyone sacked off work to go to Bali for 6 months.
In fact, it's mostly the opposite.
1) High performers will perform highly
Put simply – a lot of people just weren't taking enough holiday.
While many people were using the policy as it was intended, there were a number who weren't – we had quite a few people lingering around 21-22 days off per year. Personally, I don't think that's enough to keep you fresh and at the top of your game.
There's some interesting psychology at play here.
Putting a numerical limit on holiday time has a counterintuitive effect. If you are given 25 days of holiday that are yours to take, then you are subconsciously motivated to take them. It's some kind of psychological quirk of ownership – when something belongs to you, then you immediately value it far more highly.
Whereas the lack of a number – the very concept of unlimited – potentially meant you didn't value that holiday time in the same way.
The people we hire at Charlie are hard workers who are passionately engaged in their work and careers. In that context, I'm not surprised some people weren't being conscious enough about their time off. Without that numerical allowance, there's no visual cue for you to refer to, no number hanging over your head.
As one team member pointed out in our company survey:
“'Unlimited' means there's all this possibility... there's so much choice, that you never choose”.
You have all the time off in the world, and all the time to take it in... so you don't.
2) It opens the door to unfairness
We provided unlimited time off so individuals had the freedom to do what they needed in order to do their best work.
But what we perhaps didn't appreciate at the outset was that holidays aren't singularly about the individuals taking time off. It also affects everyone else in their team and everyone across the company as a whole.
While one person might only want to take 20 days off in a year, someone else might feel they need 30. But when one person is away, their work needs to be covered – and it's the person still in the office who takes up the slack.
There's another aspect to this as well. As with every business, Charlie is made up of many different roles that demand very different skill sets and levels of expertise, and we pay people accordingly. This naturally means there is a wide range of salaries across the business.
What this meant in practice was a gap between those who could afford to take lots of holidays and those who could not.
But how much you are paid shouldn’t be relevant to how much holiday you take – that was never how unlimited holiday was intended to work.
3) The anxiety of not knowing the limits
I think this is really the clincher within the whole debate.
Numerical limits on holiday allowance don't just define how many days you have to take that year – they also help define what is acceptable behaviour. They act as a company's handrail, letting everyone know just where the edge is so they can feel confident about where they stand. Unlimited holiday policies take that handrail away.
This was a theme that came up again and again in our internal survey.
"I always felt a little nervous asking for time off because I wasn't really sure if I was asking for too much – I didn't know what the norm was".
"I remember guessing at whether I was taking the mick... and what other people across the company would think of my usage? I felt like I was somehow doing something against the best interest of the company and my team-mates."
This was a real kicker. We provided unlimited holidays to try and make sure everyone was always at their freshest. The fact that it was causing so much anxiety was a big problem – if you're fretting every time you book a holiday, then you aren't relaxing properly.
4) Unlimited doesn’t really mean unlimited
Now, this is the tricky part.
Because ‘unlimited holiday’ cannot really mean unlimited holiday. It just can’t. The reality of running a business dictates there will be occasions we need our team not to go away.
What ‘unlimited’ really means in this context is “we’re not counting”. But using that word meant our team leads felt they had no grounds on which to deny holiday requests if that request went against the needs of the business.
In that context, a team lead denying a holiday request became so much more personal than it would be otherwise. It wasn’t just “ah, sadly you can’t go away on that date”. Instead, it became “No. And I don’t trust your decision-making on this”.
For us, and the culture we’re trying to build at Charlie, those conversations are too fraught to be baked into our holiday policy. It was making life more difficult than it needed to be – for everyone.
So... Could unlimited holiday work?
I expect at least a few people reading this might be looking at this policy for their own company, or maybe learn how to run theirs better. So I guess their question is this: can unlimited holiday work?
I can’t speak for every company out there – but for Charlie, I think the answer is no. We had a really good crack at unlimited holiday, and personally, I’m not sure where else we could have taken it.
There are bigger companies than Charlie out there happily using unlimited holiday policies. Many of them have been around a lot longer than us, and are successful enough to lend the idea some serious weight.
Companies like Netflix and LinkedIn have obviously found a way to make it work for them, but I don’t think it’s the right policy for Charlie. I think the system leaves all the emphasis on the individual to make the right call, and that decision will always contain just a little too much anxiety.
So where do we go from here?
For a little while at least, we thought we knew the answer to the time-off question.
Now, I’m a little less sure.
So where do we go from here? If we tried unlimited holiday and it broke, then what do we replace it with?
Ripping up unlimited holiday and starting again forced us to think hard about what we wanted our new policy to achieve, and what a 'good' holiday policy even looks like in the first place.
By going through that process, we were able to put together a holiday policy that I think is genuinely best-in-class – both for the team and Charlie as a whole.
If you want to take a look at our design process as well as the holiday policy we finished with, then just hit the link below.
CharlieHR builds software to help small businesses thrive. From tracking time off, running performance reviews or keeping tabs on employee engagement, Charlie provides everything you need to manage your people – all in one place.
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