In our third Foresight Scan blog post, we focus on the issues surrounding the rise in the number of companies in the UK offering unlimited paid leave and the rise in flexible working demands. We also include a quick reminder on how to follow the legal diet.
Unlimited annual leave
In the UK, workers are entitled to a minimum of 5.6 weeks of annual leave per year of leave. This equates to 28 days (including public holidays) for those working five days a week.
In the United States, unlimited paid time off is an increasingly common benefit and is often used by tech companies to attract and retain talent. Well-known global companies, especially those in the technology sector, have adopted unlimited paid vacation policies. UK recruitment websites have shown that recently there has been an increase in UK companies following the US tech trend and also offering unlimited vacations. In today’s market where the ‘big quit’ is in full swing and it is becoming increasingly difficult for employers to attract and retain talent, many UK companies may consider introducing unlimited holidays in a bid to win (and retain) new talent.
It should be noted that we refer in this post to paid unlimited vacations, where employees can take as many or as few vacations as they want per year, all of which are paid. This differs from arrangements where a company offers unlimited unpaid to leave.
Such a policy arguably has a number of benefits, including increased productivity (as employees feel better rested and are less likely to experience periods of increased stress and burnout), talent recruitment and retention (because having unlimited vacations is an attractive perk for many people, making the company stand out) and improving employee well-being (especially because the ability to take more free time can help employees better balance work and private life).
However, offering unlimited holidays to employees is not without difficulties and risks. For example:
- In the United States, where employees have no or very limited rights to paid time off, unlimited paid time off is a very unusual, generous, and (relatively) simple benefit to implement. In the UK, however, full-time employees are already entitled to 5.6 weeks of paid leave, so any “unlimited” leave would effectively be additional paid leave on top of the 5.6 weeks already in place. This could reduce the perceived generosity of the benefit and make it more complicated to administer;
- There is a risk that such a policy will lead to injustice and possibly disaffection within the company. No two employees are the same and while some will not take additional time off due to the policy, there will undoubtedly be others who will make more use of the policy and take long periods of additional time off. This could lead to resentment, unfairness (employees having to cover people taking extra vacations), stress and employee dissatisfaction, all of which defeat the purpose of the policy. An employee who takes 5.6 weeks of paid leave in accordance with legal rights may not be satisfied that a colleague on the same team takes 12/15 weeks and receives the same remuneration;
- It is open to abuse. Obviously, people are recruited to do productive work of value to their employer, otherwise there is no point in the employer recruiting and paying them. Unlimited time off only works if the employee takes responsibility for managing their work and is able to work their time off around their contractual commitments. This could be seen as allowing employees to take as much time off as they want, but that is not the case. it only works if employees take responsibility for their workload and take time off responsibly without diminishing service delivery. It requires trust; and
- Long periods of vacation could cause employees, no matter how talented or experienced, to lose touch with their daily work and their colleagues. In some professions, skills can quickly atrophy if not practiced regularly. People returning from a two week holiday may take a few days to pick up the pace, someone returning after three months may take much longer. There can also be issues with employers preferring and promoting employees who don’t take extra vacation – that makes sense; nothing prevents rewarding the most committed employees.
Advice to employers
Introducing an unlimited leave policy is a brave step. It’s not good for all businesses. It only works if there is a high level of trust and a responsible workforce that won’t abuse it.
For employers brave enough to try it, we advise employers not to make unlimited leave a contractual right, but rather to spell it out in a policy document. We suggest that it be given a trial period, perhaps involving a small portion of the workforce at first to see if it works. The policy document should give the employer, in very clear and unambiguous language, the right to bring employees back to their contractual right (i.e. 28 days a year) at their sole discretion. This means that if an employee abuses the right to indefinite leave, or if the employer simply decides it was a bad idea, the employer has the option of bringing the employee back to a contractual right. It might also be prudent for this policy document to set a maximum number of days an employee can take in a block at any one time, to minimize the impact on teams. It would also be prudent for the employer to give the employee reasonable notice of this change. Employees should also still be required to seek pre-approval for their leave, as they currently do with almost all employers.
We also advise employers who want to implement an unlimited leave policy at the same time to implement a method of carefully tracking annual leave to ensure that people are taking enough leave during the year. Ultimately, annual leave is a matter of health and safety (working time regulations are essentially a health and safety measure) and should be taken to avoid intense periods of stress and anxiety related at work and employers have a duty to actively ask their employees to take their contractual right to leave. Monitoring will also help identify instances where employees are taking excessive paid time off, which will help reduce the risks described above.
In our experience of employees or workers who have been granted indefinite leave, only those in positions of authority and responsibility have handled it sensibly. In fact, they didn’t tend to take much more time off than those with restrictions, but they appreciated not having someone to keep score.
Flexible work requests
Although many companies are now working in the office part again, if not all the time, there has undoubtedly been an increase in demands for flexible working as a result of the Covid-19 pandemic. As we said in our first horizon scanning blog post, employers were initially reluctant to respond decisively to flexible working demands as they wondered what hybrid working would look like for their business. However, in this new world of work, employers will have to start making decisions.
Under the UK statutory scheme, employees with at least 26 weeks of continuous employment have the legal right to apply for flexible working. An employee can only make one request per 12 month period. If the request is made in a certain way, a procedure is triggered which the employer must follow. Employers have three months to make a decision (this period can be extended by mutual agreement) and can only refuse the request for one (or more) of the following reasons:
- Burden of additional costs;
- Negative impact on ability to meet customer demand;
- Inability to reorganize work among existing staff;
- Inability to recruit additional staff;
- Negative impact on quality;
- Negative impact on performance;
- Insufficient work during the periods that the employee proposes to work; or
- Planned structural changes, i.e. reorganization.
As a good practice, employers should arrange to speak to the employee as soon as possible after receiving the flexible working request. A meeting can be scheduled with the employee where their request and the reasons behind it can be discussed in detail. The employee should be offered the opportunity to be accompanied by a co-worker at this meeting (although the employer is not obliged to offer this). If the request is denied, the employer must write to the employee informing them of the decision and setting out the reasons for the denial.
Advice to employers
If an employer receives a legal request for flexible working, they must ensure that they comply with the legal requirements for processing such a request by only denying a request for one (or more) of the permitted reasons and responding to the decision within three months (or within an agreed extended period). This will reduce the risk of a claim and ensure that the claim is handled fairly.
Employers should also be mindful of employees who say they are applying for flexible working based on childcare needs and who argue that they have worked remotely during the pandemic for a long time and it has worked well. The denial of such a request may lead to allegations of indirect sex discrimination, since the determining factor in the request is child custody. In the UK, it is possible to justify indirect sex discrimination if you can demonstrate that the processing was a proportionate means of achieving a legitimate aim. It can be difficult to make this argument successfully if the employee has already worked from home for a long time and achieved a satisfactory standard. However, satisfactory performance from home during shutdowns or times when most people are working from home does not mean that it will be the same when there is more than one change of other employees or other contacts. At work.
It is also important that requests from parents or guardians are not prioritized over requests from other employees. Flexible working requests should not be accepted or rejected based on the employee’s motive.
Employers should be willing to take the time to discuss the employee’s request and suggest an alternate arrangement if it is felt that the employee’s proposal will not work in its current form. Overall, employers should consider each request on a case-by-case basis and on its own merits.