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Surprise downside of 'unlimited' annual leave trend

Studies have found workers don't take much more time off work than those with traditional frameworks.

A new office perk being offered around Australia is "unlimited annual leave", but it might not be as attractive as it sounds. But how could there be any downside to the idea of going on holiday as much as you like?

According to a recent study, a third of Australian employers have brought in the progressive policy and another 37 per cent want to introduce it at some stage. But recruitment expert Graham Wynn told Yahoo Finance there were a few issues that can pop up in a situation like this.

"I think even though it's unlimited annual leave, there would still be a lot of speculation about when you can take it," the Superior People Recruitment founder and director said.

Man on holiday
Going on annual leave can be worth every second, but having an unlimited amount seems too good to be true. (Source: Getty)

Do you have an interesting workplace policy? Email stew.perrie@yahooinc.com

Greg recently left a tech sales job in Australia that offered unlimited paid time off. He said it can be a bit of a "double-edged sword".

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While he believes the policy could work in large companies, it doesn't really mean unlimited if you have a small team.

"Taking any leave was quite difficult to find cover and inevitably it was not the perk it seems to be," he explained to Yahoo Finance.

The policy was recently rinsed by American TikToker and standup comedian Joe Fenti, who posted a satirical video highlighting how it plays out in reality.

"What I love about unlimited PTO [paid time off] is how we still get to limit the PTO by factoring it in during performance reviews," he said, pretending to be a manager.

"We will never explicitly say what you should not do with your unlimited PTO, but you should not take more than a week's time off.

"Yes, please go and take care of the health of your mental but not when the company needs you to work."

Wynn said it was important to work out what the office culture was like before determining whether unlimited annual leave would suit.

"It's one of those things that I think if you offer it to people, most people won't abuse it," he said.

London-based recruiting company Unknown introduced the policy and later abandoned it because staff felt like they couldn't take the leave they wanted.

"No one took more than 21 days in the year," founder and CEO Ollie Scott said in a LinkedIn post.

"That happened to be consistent across our top performers, so it set a sort of weird ‘guilty standard’.

"There’s just a general anxiety of ‘yeah but like, actually how much can I take?’"

There's also the issue of when you hand in your notice.

"Unlimited annual leave means that if you leave an employment, you have no annual leave built up as payout," recruitment expert Graham Wynn explained.

This can sometimes be thousands or tens of thousands of dollars that a resigning employee won't receive. Greg experienced this first-hand.

"When it came time to leave the company it caused a lot of back and forth on the payout," he explained to Yahoo Finance.

"We got there in the end but it created a lot of headaches all around."

Unlimited annual leave can come in many forms and companies might have a base rate similar to the mandatory minimum requirement, which is four weeks in Australia, and then anything on top of that isn't tracked.

Funnily enough, a study found that having an unlimited annual leave policy doesn't translate to loads of staff being off throughout the year.

Back in 2018, HR software company Namely surveyed workers in the US who had a range of PTO policies and found those with unlimited annual leave only took 13 days off on average.

However, staff with the more traditional framework of a specific number of days took 15 days off in a year.

Travel company Expedia conducted research in 2022 that found workers with unlimited annual leave only took 3.5 days more time off than the national US average.

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