Time off management

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We tried unlimited holiday for three years. Here's everything that went wrong.

We tried unlimited holiday for three years. Here's everything that went wrong.

After three years, we killed Charlie's unlimited holiday policy for good. We decided that offering teams an unlimited holiday allowance just didn'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 holidays pretty passionately.

And yet, we've always known that it is far from perfect – 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.

In 2018, 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 didn't work for us – but probably not for the reason you think.

But before we get down to it, here's some context.

How does unlimited holiday work and what is it?

When I say unlimited annual leave, 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.

Unlimited holiday means your team members can book as many or as few holidays as they want within the tax year – it's not regulated by the company, but employers still have to ensure team members take enough holidays to comply with employment law (in the UK, that's equivalent to 5.6 weeks a year and can include bank holidays).

At Charlie, that's how we managed our small business' time off, with no input from management as to how much time they were, for example, taking out of work.

Why did we offer unlimited holiday in the first place?

When we started CharlieHR in 2015, unlimited holiday just made sense to us. We really didn't care what an arbitrary number living on a time off spreadsheet told us about a person. We cared about what they did at work.

We wanted our team to deliver outstanding work, and we trusted them to take the time off they needed in order to get that done. They were all adults and were mature enough to know what that meant 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 hired the right people you didn't need to worry about having rules in place: the team would just run itself.

There was 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. Let's see now why it failed for us.

Why an unlimited holiday policy did not work for us

Now, I know what you are thinking... and the answer is no. We didn't scrap unlimited holiday because everyone gave up on work to go to Bali for 6 months.

In fact, most people did the complete opposite and here's what we learnt from it.

1) High performers performed 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 was 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 at the top of your game.

But here's where it gets interesting. 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 conscious enough about their time off. Without that numerical allowance, there was no visual cue for them to refer to, no number hanging over their head.

“'Unlimited' means there's all this possibility... there's so much choice, that you never choose”. CharlieHR team member

2) It opened 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 affected everyone else on their team and everyone across the company as a whole.

While one person might have only wanted to take 20 days off in a year, someone else might have felt they needed 30. But when one person was away, their work needed to be covered – and the person still in the office took up the slack.

There was 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". Charlie Team Member

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.

"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." Charlie Team Member

4) Unlimited doesn’t really mean unlimited

Now, this was the tricky part.

Because ‘unlimited holiday’ didn't really mean unlimited holiday. It just couldn't. The reality of running a business dictated there would be occasions we needed our team not to go away:

  • Business needs
  • Overlapping time off
  • Workloads

What ‘unlimited’ really means in this context was “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.

For us, those conversations were too fraught to be baked into our holiday policy. It was making life more difficult than it needed to be – for everyone.

So... Can unlimited holiday really work?

I expect at least a few people reading this might be looking at this policy for their own company, or maybe learning 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 and perhaps not for startups in general. 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.

What does our holiday policy look like now?

So where do we go from here? If we tried an unlimited holiday policy and it broke, then what did we replace it with?

Ripping up unlimited holidays and starting again forced us to think hard about what we wanted our new policy to achieve, and what a 'good' holiday policy even looked 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.

Of course, it's crucial to note that this holiday policy has been iterated over the years, and only recently we managed to find what we would like to call the best way to make sure our team is rested and perform at their best.

Here's what our holiday policy looks like now:

  • 25 days of holidays per year excluding bank holidays
  • The office will close on the 24th and 31st December
  • We encourage people to take at least 5 days off every quarter
  • Holiday rollover is inexistent

And if you're not sure about whether unlimited holiday is the right call for you, maybe have at look at our own.

Click here to download our onboarding checklist

Unlimited holiday policy FAQ

What is the holiday entitlement in the UK?

In the UK, full-time staff is entitled to a minimum of 28 days of paid holidays, however this can also include public holidays depending on the employer.

Many employers choose to offer more to their team, and to make themselves more competitive on the market.

According to a survey ran by COO stories in 2018, 58% of 50 London techn startups offered between 33 and 35 days of holidays to their team members.

What does it mean when a business offers unlimited holiday?

Unlimited holidays can be a great benefit, but what does it mean exactly? It means the following:

  • Employees take as much time as they need every year, as long as it's approved by their managers
  • They don't have a limit on the numbers of days they can take
  • It promotes a flexible working environment for people to manage their time responsibly
  • It can help remove the distinction between any kind of time off: sick days, personal days, etc.

What's important to keep in mind, however, is that unlimited holidays doesn't mean unlimited time off – businesses will have to put together guidelines to make sure operations don't get impacted by it.

Do you get paid when you have unlimited holiday?

Yes, employees will be paid for the time off they take – most companies will rely on the trust they put onto their employees, however, there might be several guidelines to make sure there's a limit on how much time off is appropriate.

What are the pros and cons of unlimited annual leave?

Pros of unlimited holidays:

  • Gives you a competitive edge on the employer's market by getting more holidays (technically, at least) compared to other employers
  • Boosts retention with team members that don't want to give up on such an advantageous benefit
  • Guarantees your team members get the right life/work balance by taking enough time off
  • Puts a culture of trust where team members are in charge of their own time off

Cons of unlimited holidays:

  • Makes it difficult to stagger holidays since there is no limit on the amount of days someone can take
  • Can make it difficult on an operational level and create levels of unfairness between employees who take too much time off and others not enough

Which famous companies have unlimited holidays?

At the moment, there are quite a few big names with unlimited holiday policy such as Netflix, LinkedIn, JustPark and Goldman Sachs.

Maybe you're looking for more resources when it comes for time off management. If that's the case, we've got what you're looking for right here:

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