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Unlimited leave policies benefit companies and their stock prices

Companies with flexible policies perform better on the bourses as they attract better talent, who tend to work harder and check email on vacation too

Unlimited paid time off benefits both employees and employers as well as the stock prices of companies with such policies.
Unlimited paid time off benefits both employees and employers as well as the stock prices of companies with such policies. (File photo/Pixabay)

Advocates of flexible working arrangements have always held that unlimited paid time off benefits both employees and employers. Such policies allow employers to attract top talent while also helping cut costs associated with compensation for unused vacation. And for employees, the benefits include a sense of freedom as well as being trusted and valued by their employers. A Markets Live Pulse survey has found that it's also good for a company's stock price. Some 64% of 1,061 Markets Live Pulse survey respondents said that companies that offer the option will do better on the S&P 500. 

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Goldman Sachs Group made waves last year when it announced it would roll out unlimited paid time-off (PTO) to senior staff. Often associated with Silicon Valley startups, the perk is still relatively rare: only about 8% of companies in the US offer it, according to a 2023 survey by the Society for Human Resource Management. About 12% of respondents said their firm has the policy.

The option, also offered by tech companies like Microsoft, Adobe and Netflix, has become more common among employers over the last several years, in part because it sidesteps administrative headaches and slashes costs.

“If I’m the CFO, I'm loving this. This is a big money saver for me,” said Rich Fuerstenberg, senior partner at consulting firm Mercer. Adoption was accelerated by the pandemic lockdowns, Fuerstenberg said, when employees weren’t able to travel and so balances of unused PTO ballooned — spurring finance departments into action. The policy is also something of a “Swiss Army Knife” for recruiters, who use it to compete for top talent.

Even so, Fuerstenberg said it’s difficult to say that implementing the policy will lead directly to a performance boost. “It's a chicken or the egg sort of question,” he said. “We see it more in tech. We see it more in newer younger companies that don't have legacy liabilities to deal with. So are they outperforming the S&P 500 because of their unlimited PTO policy or because they're the type of employer who's going to have an unlimited PTO policy?”

Despite their bullish predictions, investors don’t see unlimited PTO as the hottest up-and-coming workplace perk. A four-day work week is likely to become more common, respondents said.

Even if unlimited PTO isn’t the norm among financial professionals and retail investors globally, the policies are fairly generous compared to the US private sector average of 11 paid vacation days after one year. About two thirds of survey respondents said their firm gives them more than 20 paid vacation days annually. Less than 40% of respondents reported taking more than 20 days off, however. 

Still, investors were optimistic about the longer breaks they’d take if given the opportunity. That outlook feeds the worry among employers that workers will abuse the policy, taking inordinate time off. But those fears are probably unfounded. More than two thirds of the companies that rolled out the policy said that the amount of time staff took didn’t change, according to Mercer. Of those that did report a change, the majority said employees actually took less leave. 

One thing that was consistent across countries: checking email while on vacation. Over 60% of finance professionals in the US and across the rest of the world admit to monitoring messages while out of the office, suggesting that fully unplugging is a challenge that’s widely shared.

Also read: Why a good manager may not make a good leader


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