Unlimited Holiday Policy: Pros, Cons & Best Practices

An unlimited holiday policy allows employees to take as much annual leave as they need, provided their work commitments are met. Instead of a fixed number of days, leave is granted flexibly based on trust and mutual agreement between employer and employee.

The benefits of offering employees more than their minimum statutory entitlements are well understood. Enhanced annual leave, for example, is a common way for employers to attract talent, and help their workforce achieve a healthy work-life balance by increasing levels of morale and motivation whilst decreasing levels of work-related stress. Offering additional paid holiday can also significantly reduce sickness leave and the loss of valuable members of staff.

However, for UK employers, implementing an unlimited holiday policy requires careful planning. One key consideration is ensuring the policy is clearly defined to prevent misunderstandings or misuse. Also, employers must still comply with statutory requirements under the Working Time Regulations 1998, which mandate a minimum of 28 days paid leave, including bank holidays, for full-time workers.

But what are the practical implications of implementing an unlimited annual leave policy? In this guide we consider the pros and cons of offering staff unlimited holidays, both from an employment law and HR perspective, including the various practicalities and key considerations to be taken into account.

 

What is meant by unlimited holidays at work?

 

Under the Working Time Regulations 1998, workers in the UK are entitled to a minimum of 5.6 weeks’ paid holiday per year. For a full-time employee working fixed hours 5 days a week, this equates to 28 days, although bank holidays can be included in this entitlement. This is often referred to as the traditional “20 days plus bank holidays” approach.

By law, employers cannot offer their employees less than the statutory minimum, but an employer can opt to offer more. This is known as enhanced holiday entitlement. Equally, it is open to the employer to put in place an unlimited holiday policy, one which offers every employee unlimited time off work, regardless of role, with no questions asked from day one of employment. Unlimited holiday means that staff can book as many or as few fully-paid holiday days as they want within the leave year, without the employer keeping count.

 

The pros and cons of unlimited annual leave

 

For any UK-based business thinking about replacing the traditional “20 days plus bank holidays” approach with a far more flexible unlimited holiday policy, there are a number of unlimited holidays pros and cons that must be taken into account by employers.

 

The pros of unlimited holidays

 

Empowerment and employee engagement

Offering unlimited holidays is a policy where employees are given no set number of holiday days per year, meaning an employee can, at least in theory, take as much or as little time off as they like. As such, an unlimited holiday policy can be hugely empowering. By allowing employees to take responsibility for what time they need off work, this level of trust invites them to take ownership of the future of the business. It sends a message to staff that the company is not just their employer, but something that they are responsible for taking care of which, in turn, can create enhanced levels of employee engagement and help to boost productivity.

 

A beneficial work-life balance

By providing staff with unlimited time off work, this provides employees with the freedom and flexibility to do what they need to do in order to meet the demands of both their personal and professional lives. In this way, an unlimited holiday policy will encourage employees to do their best work, whilst eliminating the stress of having to fit in family or personal commitments around this.

 

Recruitment and retention

Having an unlimited holiday policy can act as an incentive to attract more talent to the business. Equally, it can help to retain existing employees who will not only feel valued and respected, but can enjoy the benefits of longer holidays.

 

The cons of unlimited holidays

 

Insufficient rest breaks

For some, the limitless choice afforded by endless time off work may be more overwhelming than empowering, with the unexpected result that employees may take fewer holidays not more. This is because the lack of a set number of paid holiday days can discourage staff to take time off. Ultimately, unlimited can mean that there is all this possibility, but with so much choice a person may actually never choose. In contrast, where an employee’s annual leave entitlement is limited to a specific number of paid holiday days per year, this numerical allowance can subconsciously motivate the employee to use these, where these days are theirs to take within a specified timeframe.

 

Inequality of rest

If an employee is a naturally hard worker, who is passionately engaged in their work and professionally ambitious, they may easily fall into the trap of taking less not more holidays. However, at the other end of the spectrum, there will also be those who take far more paid days’ leave than anyone else, creating a sizeable gap between the least and most holidays taken amongst members of staff. The net effect is that those employees who work the hardest, and take the fewest holidays, will often be burdened with the additional workload of those reaping the rewards of an unlimited holiday policy. Holidays are not singularly about an individual taking time off, where being absent on leave can affect everyone else, leaving those in the office to pick up the extra slack.

 

Lack of clarity

By refusing to put a numerical limit on annual leave entitlement, there is no guide for staff as to what is or is not acceptable, placing significant emphasis on each individual to make the right “call”. In turn, this is likely to create unnecessary anxiety for employees when booking time off work, potentially fretting at whether they are doing the right thing and if they are going to be thought badly of by management or colleagues. Equally, it could ruin their relaxation time by feeling worried about what other people across the company will think of their “unlimited usage”. As such, having a clear limit on holiday allowance does not just define how many days a person has to take that year, it will also help to define what is acceptable conduct and the workplace norm, enabling an employee to confidently take their holiday entitlement and to do so guilt-free.

 

“Unlimited” is a misnomer

The reality of running a business means that “unlimited holiday” cannot ever really mean wholly unlimited, where annual leave may not be viable all of the time, such as where the business is facing high customer demand or requests for overlapping time off. For operational purposes, even under an unlimited holiday policy, the employee will still be required to request time off and the employer will be required to approve these requests based on business needs. Still, the expression “unlimited” can create unrealistic expectations and result in disappointment where a request is refused. This can also put line managers, or anyone else responsible for authorising holiday requests, in an extremely difficult and uncomfortable position, especially as the expression “unlimited” suggests that they will have no justifiable grounds for refusal.

 

Practicalities of implementing unlimited holidays

 

There are various stresses and strains that can come with an unlimited holiday system, not only from a practical point of view, but also from an employment law and HR perspective.

For line managers and HR personnel dealing with holiday requests, the decision-making process can be unnecessarily tricky and awkward, not least where they are forced to refuse requests because of business needs, but also where the employee has not fully understood how the policy of “unlimited holidays” works in practice. This may mean that an employee misses out on a last minute holiday or a much-needed break, where the whole premise of offering an employee enhanced holiday entitlement to achieve a better work-life balance will be undermined by the reality that “unlimited” does not mean “unlimited at any time”.

Refusals can also create conflict, both between the person on the receiving end of a refusal decision and the person tasked with making this decision, but especially between the disappointed employee and those members of staff who have made advance requests at the beginning of the year and have had their leave requests approved. The end result is that working relations all round can be damaged, entirely eradicating any good intentions.

Equally, if an employee is committed to the success of the business, as well as their own career progression, they may get into an unhealthy habit of taking less holidays and not more. Without a numerical allowance, there will be no number hanging over that person’s head, nor a ticking clock as to when this number is about to expire. For these individuals, there will be a very real risk of employee burnout resulting from too few rest breaks. In turn, this will potentially put the employer in breach of its’ statutory duty to ensure the health, safety and welfare at work of its’ employees, including their mental wellbeing.

Additionally, an employee who does not take enough rest breaks can start to underperform. One of the most common signs of employee burnout can include a drop in a persons’ performance or productivity caused through fatigue and exhaustion, as well as an inability to carry out normal work-related tasks or even follow simple instructions. A lack of focus or concentration can also result in an increased incidence of mistakes or accidents at work, potentially putting the physical health and safety of the worker at risk, not to mention other members of staff and the public. As such, overworked employees not being at the top of their game is often the least of an employer’s concerns when it comes to employee burnout.

An employer must take steps to reduce or remove any causes of work-related stress, including encouraging staff to take at least the statutory minimum leave entitlement so that they do not burn out. This is because the regulations on working time are there to safeguard employee health and safety. By having in place an unlimited holiday policy, the employer potentially loses any sense of control over this important aspect of annual leave.

 

Unlimited holiday policy

 

When creating or implementing an unlimited holiday policy, you need to plan carefully to make sure it is fair and compliant with UK employment law.

Start by clearly defining the policy and setting out expectations for how leave can be taken. Make it clear that while holiday is unlimited, it must be approved and should not disrupt work commitments. This helps prevent misunderstandings and ensures employees know the policy has boundaries.

You also have to ensure the policy follows the Working Time Regulations 1998, which state that full-time workers are entitled to at least 28 days’ paid leave, including bank holidays. Unlimited holiday should add to statutory leave, not replace it.

Train managers to handle leave requests fairly and consistently to avoid any perceptions of favouritism or misuse. Managers should also encourage employees to take a healthy amount of time off to avoid burnout, as some may feel pressure not to take leave in a performance-driven environment.

It’s important to track leave usage to make sure statutory leave requirements are met and workloads remain balanced. Monitoring leave also helps prevent some employees from being overburdened while others take too much time off.

Finally, you should review the policy regularly to ensure it works as intended. Ask for feedback from employees to spot any problems and make improvements.

 

Alternatives to unlimited holidays

 

For those UK employers who have already trialled the “unlimited holidays” concept in practice, the feedback so far is that this type of policy is not always fit for purpose: mainly because some employees were not taking enough time off, whereas others were taking too much. For a holiday policy to be a success, the employer will need to equalise this disparity.

The question remains as to whether or not there is a suitable and attractive alternative to unlimited holidays, and what a generous holiday policy should look like: the simple answer being a policy that provides for additional days off, over and above the statutory minimum, but one that is not unlimited. By providing an enhanced but numerical limit, this will act as a useful guide for staff as to what is acceptable, helping to dispel any anxiety and to remove any responsibility to make the right call when it comes to booking annual leave. In this way, employees should feel encouraged to take the time off that they need to do their best work.

However, ensuring that employees get the rest and recuperation that they need does not just mean persuading them to take a certain number of days off per year, it also means spreading that holiday from the start of the year to the end. As such, the policy should also provide guidelines that staff take a minimum number of days off in each quarter, helping to ensure that employees are not burning out from long stretches without a break.

As such, a more appealing holiday policy than an employee might find elsewhere could include:

 

• 25 days of bookable holiday per year, plus bank holidays
• closure over Christmas, in addition to the 25 bookable days
• a company-wide compulsory annual minimum of 22 days
• guidelines to take at least 5 days off each quarter
• a rule that holiday cannot be rolled over.

 

The compulsory annual minimum is designed to make employees more mindful about taking time off, whilst the ban on carrying leave over should provide greater incentive for employees to take the rest that they need during the course of the annual leave year.

 

Need assistance?

 

There are many factors to consider before adopting an unlimited holiday policy. DavidsonMorris’ HR specialists provide expert advice to employers on all aspects of employment entitlements and benefits, including annual leave offerings. For specialist guidance, contact us.

 

Unlimited holiday policy FAQs

 

What is an unlimited holiday policy?

An unlimited holiday policy allows employees to take as much paid time off as they need, as long as they meet their work responsibilities and the leave is approved.

 

Does unlimited holiday replace statutory leave in the UK?

Employers must still comply with the Working Time Regulations 1998, which require a minimum of 28 days’ paid leave (including bank holidays) for full-time employees.

 

How do employers ensure fairness with unlimited holiday?

Employers must monitor leave patterns to ensure employees take a reasonable amount of time off without overloading others. Clear guidelines and consistent approval processes are key.

 

What are the benefits of an unlimited holiday policy?

Benefits can include improved work-life balance, increased employee satisfaction, better retention rates, and a more trusting, results-driven culture.

 

What are the risks of unlimited holiday policies?

Some employees may take very little leave due to pressure or uncertainty, leading to burnout. Others might take excessive leave, affecting productivity and team morale.

 

How can employers encourage employees to take leave?

Managers should regularly remind employees to take time off and monitor workloads to ensure no one feels discouraged from using the policy.

 

Can unlimited holiday work for all businesses?

Unlimited holiday policies work best in results-driven workplaces where performance is measured by output rather than hours worked. It may not suit all industries or roles.

 

Do employers still need to track leave?

Employers should track leave to ensure compliance with statutory requirements and to monitor leave trends for fairness and workload management.

 

How do you implement an unlimited holiday policy?

Employers need clear guidelines, manager training, and a robust approval process to avoid misunderstandings and ensure the policy is used responsibly.

 

Can an unlimited holiday policy improve employee retention?

When implemented well, it can improve morale, work-life balance and retention, especially in competitive industries where employee wellbeing is a priority.