How Does Unlimited Annual Leave Work?

The idea of an unlimited paid leave policy can sound too good to be true. Is it positively impacting employees and businesses, or is it proving to be more of a hindrance than a benefit?

Unlimited paid time off (pto) is often used as an incentive to attract top quality talent to an organisation, as candidates are seeking increasingly flexible working arrangements. But how does unlimited annual leave work and how could your organisation begin offering unlimited leave without seeing a significant downfall in employee productivity across the board? An unlimited leave policy can be extremely beneficial to the culture of your organisation as it allows for a more flexible working arrangement with your team. This is beneficial as candidates looking for jobs will often chose a job with more employee benefits such as unlimited leave, working from home days and a great work life balance over other roles.

While an unlimited paid leave policy does sound attractive, it does come with it pros and cons. In this article we will be exploring those pros and cons so that you can consider whether you can offer unlimited leave in your organisation.

Before we start let’s establish that an unlimited paid leave policy IS NOT the same thing as an unlimited time off policy. An unlimited time off refers closer to offering unlimited unpaid leave. Instead of more paid vacation days and paid unlimited holidays, you can take as high amount of vacation as you like, but you won’t be paid for it.


Unlimited paid leave allows employees with a salary to take paid time off when they need it. Usually, employees still need to provide companies with notice or receive approval from management. Furthermore, employees with a salary are measured by their performance and goals completed rather than hours put into their work. 


  • Promote health and wellness. Happier employees perform better. Research from Oxford University’s Saïd Business School reports that “workers are 13% more productive when happy.” In addition, healthy employees cost less to insure. 
  • Simplify your admin duties. In traditional paid time off policies, HR needs to track their employees’ reasons and days that they take off. In addition, accruals and carry-overs. However, HR will only need to manage approvals and record the day’s employees take off with an unlimited leave policy. 
  • Save money. The traditional paid time off system requires companies to pay employees a standard amount of vacation days whether an employee takes time off or not. An unlimited paid time off policy frees companies from the obligation to pay employees for the vacation days they never took off.
  • Secure Talented Recruits. 70% of employees greatly favour businesses with unlimited paid time off, according to MetLife’s 2020 Employee Benefits Survey. Furthermore, companies will avoid negotiating standard paid vacation leave in the recruitment process. 
  • Increase your business’s productivity. Unlimited leave will simplify businesses’ ways of measuring employee productivity. It will increase the consistency employment engagement and productivity Businesses will no longer need to be concerned about how many hours their employees work and instead focus on results and goals. Moreover, employees may feel more motivated to work to their fullest potential when they know they can recharge. 


While there are upsides to implementing an unlimited leave policy, it’s good to understand its downsides too. 

  • Make Sure You’ve Built Trust With Your Employees. Your employees must have faith in management. Otherwise, employees can take advantage of the unlimited leave policy. 

Relevant: Poor Culture? Here Are Five Ways To Transform It

  • Burnout. If employees begin to believe that taking less time off is a sign of loyalty, your team will likely experience burnout. And, this affects not just the business’s performance but your employees’ health too. 
  • Employees Could Feel Obliged To Take Less Time Off. A study by Namely showed that employees with unlimited paid time off took an average of 13 vacation days, compared to 15 days for their traditional leave counterparts. This could lead to employees being left with too many unused vacation days. 
  • Uncertainty. An organisation that offers unlimited pto can experience uncertainty amongst employees about how much time off is appropriate to take. 
  • Senior-Level Employees Could Feel At A Loss. If companies are established and change to unlimited paid time off, some senior-level employees may feel frustrated that a new hire is getting the same leave entitlements after they’ve worked there for years. This could prove to be a major problem, especially in small businesses.  
  • Conflict of Schedules. There could be multiple people requesting time off at the same time, and the business may not have enough resources to cover them. 
  • It’s A Possibility That It Could Conflict With Mandated Leave Policies. Parental leave is a good example of this.
  • Implementation Could Be Difficult. Implementing an unlimited paid time off policy could add more administrative work than it’s worth in an established business. Tension between employees could become apparent.  

If you’re considering unlimited paid time off for your employees, make sure you communicate directly what’s really acceptable and explain the boundaries. If you’re unsure if it’s right for you, why not try it out and conduct some research within your own company? Or, ask what your employees think about the idea first. If it doesn’t work for you, you can always go back to the traditional pto model.