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Kiwi employers start trialling unlimited annual leave

18 Aug 2023

| Author: Reweti Kohere

Netflix does it. So do Microsoft, LinkedIn and Salesforce. And here in New Zealand, software company Actionstep and game developer Rocketwerkz are some of the first businesses to offer employees unlimited annual leave.

With only a handful of workplaces offering this perk, employment lawyers say the trust and confidence that employers and employees share will prove crucial in determining whether unlimited annual leave is more widely adopted in New Zealand.

The employment benefit, focusing on deliverables and results rather than hours worked, might not suit all industries. But for those it does, employees could be empowered to decide when, and for how long, they go take leave.

Unlimited annual leave, the four-day work week, work-from-home days and greater flexibility in work hours – workplaces have been grappling with these issues for the past three years after covid-19 pandemic restrictions suddenly foisted the trickling trend of remote or hybrid working on businesses.

While popular overseas, unlimited annual leave is only starting to emerge in New Zealand. Under the Holidays Act 2003, workers in New Zealand are entitled to four weeks’ paid annual leave after 12 months of continuous employment. An unlimited leave policy sits over and above this statutory benefit.

The freedom with which employees can carve up their workday however they like, and still perform well, comes back to ensuring their workplaces are environments that “can operate on a high-trust model”, says employment lawyer William Fussey.

“Which is why I can see more companies bringing on that kind of policy, but I can’t see it happening on a completely widespread basis.”

Fussey, an associate at Anderson Lloyd and a member of ADLS Employment Law committee, says the policy could empower employees, when figuring out their leave periods, to collaborate among themselves.

“If there’s an even greater trust model, it might be that employees discuss between them ‘ok, look, I’m going to take three weeks off here. Are there enough people around to cover that?’ It’s about having those collaborative conversations between colleagues, with supervisors.”

 

Need for agreement

Tompkins Wake partner Daniel Erickson agrees. The way in which employers can keep a handle on this significant benefit will initially come down to how much they and their employees trust each other.

“You may just have to take the employee on their word that this is what they’re doing. Now, if it happened frequently or if an absence was extended, then you may be asking more specific questions at that point.”

Beyond that, prudent employers will set parameters. For example, taking annual leave must be by agreement or the employer can defer the request if the delay is in the interests of the business.

Erickson, a member of ADLS Employment Law committee, says the need for agreement helps bosses avoid situations where “everyone takes holidays at once or someone takes a long period of leave when they were in the middle of an important project”.

Fussey adds that an unlimited leave policy should stipulate that the employer retains the discretion to grant a leave request. On the other hand, for an employer to have the discretion and yet never approve a request “makes a mockery of the idea that it’s unlimited”, he says.

“In theory, it’s unlimited, but you still need to check in with your supervisor that you can take the time off purely on the basis, say, of operational needs. So, the employee might end up taking twice as much annual leave as they would ordinarily be entitled to, but it’s an ongoing conversation with the employer around when those things happen.”

 

Encouragement

A common thread runs through the sorts of businesses implementing the policy, Fussey says.

“When you look at the kind of jobs or industries that are doing these unlimited leave policies, they tend to be in industries where employees are really excited about coming to work, they’re got really exciting, creative projects they’re doing. They’re chained to their work because they love it so much.

“And unlimited annual leave is kind of a way of encouraging them to take time off when they need it.”

Overseas, the likes of Netflix, LinkedIn and Visualsoft have trialled similar policies, but found most people ended up taking less leave when compared to an allocated number of days.

Closer to home, Australian innovation consultancy firm Inventium, found the average amount of leave used after 12 months was 24 days, rising to 27 days after two years. Founder Amantha Imber said the finding meant staff were taking what they needed and yet the policy wasn’t being abused as other employment benefits surrounded the business’ leave policy.

After testing the policy with all employees for a year, and in what was believed to be a New Zealand first, Actionstep recently decided to make the work benefit permanent. And with offices around the world, the company has instilled a minimum requirement that staff take at least four weeks off each year.

Vice president of engineering Stevie Mayhew recently told Seven Sharp the company experienced its “biggest growth ever” while its year-long trial was running, starting in May 2022. “You could say it might have cost us not to have done this.”

In a similar vein, Rocketwerkz perceived its unlimited annual and sick leave policies as compelling points of difference as it fought for talent within the competitive, high-paying IT industry.

 

Greater flexibility

Unlimited annual leave is part of the broader trend of greater workplace flexibility. With about 50 companies in New Zealand already using a four-day work week roster, there’s majority support among New Zealanders for introducing the work concept more widely, according to a 1News Kantar public poll in May this year.

Flexible working hours is seen as one of the most important employee benefits in 2023. Frog Recruitment’s latest annual employment and salary report found the most common flexibility option offered is individual arrangements based on one’s role and seniority, followed by one’s employer deciding work hours and work-from-home and office days. While flexibility remains an important motivator for jobseekers, cost-of-living pressures mean salary and pay is becoming more of a priority.

Actionstep’s average leave balance showed most staff had taken more than the statutory minimum allowance, but it wasn’t excessive.

Mayhew said the business trusted its employees to do the work needed for Actionstep to succeed, “and we want to make them be able to have good lives alongside that. It’s something we think is really important – to make sure our staff are happy. This is one of the ways we help to support them.”

Giving employees the ability to fit their work hours around their lives is having a wider impact.

“We’re moving toward a workplace environment, or at least aspirationally, where it doesn’t matter what time of the day you do your six or eight hours,” Fussey says.

“And if, on a couple of occasions, you only do three or four hours, and you’ve got unlimited annual leave, then it doesn’t really matter. That person is probably going to make up the time elsewhere because they’re working hard overall.”

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