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July 18 — Companies in the tech industry are known for the generous benefit packages they offer their employees. One of the most popular ones—unlimited paid vacation leave—allows employees to take as much time as they want as long as their supervisor approves it and their work is taken care of.
LinkedIn Corp. implemented a discretionary time-off policy in November 2015 to replace the company's traditional accrued vacation leave program. When it did so, the social media company paid out $34.5 million to employees in accrued vacation balances, the company's 2015 10K report said.
Grubhub also adopted an unlimited paid vacation policy in 2013. In the food-ordering company's 2015 10K report, it reported to investors a lower vacation expense due to this change in its vacation policy.
LinkedIn implemented this policy months before Microsoft Corp. announced its intention to acquire the social media company for $26.2 billion. In a similar way, Grubhub changed its vacation policy months before going public in 2014.
The implementation of unlimited paid vacation policies raises many questions. Do they fit all company types? Do they benefit employers or employees? Are employers implementing them to retain the best talent or do they have an ulterior motive—such as taking off their books the unused vacation liability?
The unlimited paid vacation policies have proven to be quite popular in the tech sector, Katie Denis, Senior Program Director of Project: Time Off told Bloomberg BNA July 13. Netflix was the pioneer and this changed the company culture into freedom and flexibility for employees, Denis said.
“I see more startups and companies in the tech sector implementing these policies but I don't see a trend,” Denis said. About 2 percent of private companies have implemented similar policies but there hasn't been enough motion to change that number, Denis said.
A very small percentage of “forward thinking” companies are implementing these type of policies, which are mainly available for high salaried employees, Ellen Bravo, an advocate for paid leave policies and the Executive Director of Family Values@Work, told Bloomberg BNA July 15.
For existing companies, a lot more may be happening than we realize, Scott Grenn, a consultant at Mercer told Bloomberg BNA on July 8. “You see more and more companies implementing these policies in top echelon levels for managers and executives,” Grenn said.
There are many reasons why companies implement these policies, Grenn said. On the surface it seems very simple but it is a very complex decision, he said. The priorities may vary—some companies may implement them because of the employee benefit it represents while others may not want to have this kind of liability variable in their future, Grenn said.
According to a study conducted by Project:Time Off, employers in the private sector have accrued a total liability of $224 billion in unused, accrued vacation time. In 2014 alone, this liability grew by nearly $66 billion, the study said. What's behind such large numbers? According to Project:Time Off, this liability has amassed over years of employees rolling over unused paid time off.
When employers shift away from the traditional accrued vacation time program to an unlimited paid vacation policy, questions about employer motivation can arise. “One hopes that employers who provide this benefit do it because they want to take care of their employees,” Bravo said. “But when we see that employers are reporting to their investors a lower liability due to a change in their vacation policies, it makes you question their intentions,” Bravo said.
There is consent across the board that employers are generally well intended when they implement these policies and that for them to be successful, communication and company culture are the key factors.
“For employers, it isn't about the dollar amount only,” Denis said. Most companies are very well intended, but without proper communication with their employees on what is expected of them, the policies won't work, Denis said.
The success of these policies among employees depend on company culture and the expectations of the workforce, Grenn said.
Some in the industry wonder whether these policies may cause employees to take less time off. One piece of data that Mercer has asked for—which may be some sort of a “holy grail”—is one that measures how much time employees take off before and after the policy is instituted, Grenn said. Employers won't be happy with any statistic that tells them that employees are taking less time off, he said.
For Virgin Group the policy works perfectly, Denis said. However, Kickstarter implemented the policy because it trusted its employees, but, shortly after, the company found that employees were taking less time off and decided to reverse it, Denis said.
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Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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