by Shoosmiths LLP
With greater emphasis being placed on employee wellbeing in recent times and in a bid to remain competitive in the market, some employers have sought to increase holiday entitlement and provide ‘unlimited’ annual leave each year.
What does this mean?
In theory, ‘unlimited’ holiday means employees can take as many paid days off work as they wish. In practice, however, it is not quite as straightforward as it sounds.
Under the current regulations, full-time workers in the UK are entitled to a minimum of 5.6 weeks’ paid holiday each year (28 days) and payment in lieu of accrued but untaken holiday on termination. These regulations are in place to safeguard employee health and safety and ensure they take adequate breaks from work. Employers therefore cannot reduce this statutory annual leave entitlement. They can, however, increase the offering, but they maintain the responsibility to try and ensure employees take at least their statutory minimum entitlement.
Does unlimited really mean unlimited? In practice, no. A business would need to impose some level of constraints or at least make it conditional on performance being maintained or targets being met. There would always be instances when holiday requests would not be appropriate. For example in the event of competing requests, high workloads or general business need.
It is also not practical to have employees taking holiday for excessive periods of time, so a limit on the number of consecutive days taken may need to be imposed.
Whilst it may appear an attractive benefit at first glance, offering unlimited holiday can in fact create a whole new problem set. For a start, how does an employer maintain fairness across the business if one employee is requesting much more holiday than others in the team? If one person takes significantly more, it leaves the rest of the team to pick up the slack. In turn, those employees remaining may feel unable to take holiday and may feel disadvantaged, leading to a feeling of dissatisfaction.
The employer would also need to consider how best to approach underperformance. An employee who is not performing as expected, will not improve if they are constantly on holiday. If performance is directly related to poor performance, this unlimited holiday privilege may need to be removed.
If an employer does want to implement unlimited leave, they should carefully consider the following:
- whether the policies regarding annual leave entitlement are sufficient and clear;
- whether the employment contracts are compliant;
- the provision of training to line managers in relation to how holiday is approved or rejected;
- whether to set a limit on the number of consecutive days that can be taken at any one time;
- how underperformance is dealt with if it is related to taking too much holiday; and
- whether to make additional leave conditional upon performance targets.