What is unlimited annual leave?

Unlimited annual leave is a benefit offered by some businesses to attract and retain talent and help their employees achieve a healthy work-life balance. But what are the practical implications of implementing an unlimited annual leave policy?

In this guide, we’ll consider the pros and cons of offering your staff unlimited leave, so you can start attracting and retaining the best talent for your business. 

Is There A Limit To Leave?

According to the Fair Work Act, employees in Australia have the right to receive paid annual leave. Typically, full-time employees who work standard hours are entitled to four weeks of annual paid leave per year. This means that you are obligated to provide at least the minimum legal requirement for annual leave to your employees. However, you have the option to offer more if you choose - an enhanced holiday entitlement. 

You can also opt for an unlimited leave policy which allows all employees, regardless of their position, to take as much paid time off as they wish starting from their first day of employment. With unlimited leave policies, employees have the freedom to request any number of fully paid annual leave days throughout the year.

The Pros of Unlimited Leave

Let’s take a look at why offering unlimited leave is a worthwhile perk that can help you attract top talent to your business. 

1. Reduce leave liabilities

In Australia, employees are entitled to 4 weeks of paid annual leave. If some of this leave is not used, then that remainder can be carried over into the next year. When an employee leaves your business, you would also be required to pay out any unused leave, which means leave is a liability for your business. 

Unlimited annual leave can help reduce this liability since employees would not have to worry about saving or accruing leave. Thus, they would be more inclined to use their entitled leave freely, helping your business reduce its leave liability. 

2. Attracting And Retaining Top Talent

Unlimited annual leave is a perk that can help attract the best talent to your business because it gives employees the flexibility to take leave when it suits their needs without having to worry about how much leave they have left. 

3. Work-Life Balance

With employees having the option to take leave when they need it, it gives them the flexibility needed to fit in family or other personal commitments around their schedules.

The Cons of Unlimited Leave

Offering unlimited leave does have its downsides for your business. Let’s take a look at why you may want to avoid offering this to your employees. 

1. Lack of Clear Guidelines

By not setting a number for the maximum amount of annual leave allowed, it creates uncertainty for employees on what is considered acceptable, placing a burden on each individual to make their own judgment. As a result, they may find it difficult to fully enjoy their relaxation time due to concerns about how their colleagues perceive their unrestricted use of leave.

2. Abuse of the System

An unlimited annual leave policy can be abused by employees who choose to take advantage of the policy. This could lead to employees taking more leave than is reasonable. When creating an unlimited leave policy, it is important to ensure that the guidelines and policies in place are clear and can prevent such abuse of the system.

3. Staff Not Taking Leave

For some, the choice of taking endless time off work may be more overwhelming than empowering. Some employees may take less leave not more. If an employee is a naturally hard worker, who is passionate about their work and professionally ambitious, they may easily fall into the trap of taking less leave.