Microsoft to offer unlimited time off for US employees

Incoming corporate policy may lead to stress and burnout for staff, and reduced costs for Redmond

Microsoft is to allow US staff to take unlimited time off in a policy change that is supposed to give them more flexibility but, unsurprisingly, will also have a cost benefit to Redmond.

"How, when, and where we do our jobs has dramatically changed," wrote Kathleen Hogan, chief people officer at Microsoft in a memo to staff, reported first by The Verge. "And as we've transformed, modernizing our vacation policy to a more flexible model was a natural next step."

Starting next week, the company is saying goodbye to its four-weeks-a-year policy for US-based salaried employees. Workers will be given 10 days of corporate holidays, alongside unlimited leave. They will also be allowed leave for sickness, mental health issues, bereavement and jury services.

New Microsoft employees will not need to wait to accrue holidays.

Anyone with unused holiday entitlement will receive a one-time payment for this in April, Microsoft confirmed. Contractors paid by the hour will not be subject to this policy.

The move isn't unique: it brings Microsoft in line with LinkedIn, which it purchased for $26.6 billion in 2016, and a raft of other big businesses including Oracle, Salesforce, Goldman Sachs and Netflix.

Controversial

Unlimited paid time off (PTO) is seen as a "very controversial topic" by some tax advisors and the "outcome of such a policy heavily depends on the company's internal environment and execution," said website John The CPA.

Tech mills that grind all they can out of staff – think Twitter 2.0, for example – may not view staff positively if they ask too often for discretionary leave.

For companies that do press ahead with unlimited time off, including no paid time off liability on the balance sheet, there are no tiered policies and less maintaining of financial and HR schedules for PTO hours.

The topic is being hotly debated on Hacker News. One commentator said: "All they do is benefit the company through removal of a liability in terms of PTO hours from the company books. The workers are very likely to face social pressures when taking time off when it's viewed as an approval bestowed by management and not an entitlement inherent to the agreement when you started working."

They added: "I don't have any hard data to back this up, but my personal intuition suggests this will result in companies saving money because workers will take less time off and won't get paid out for remaining balances when they quit. This is a very worker-unfriendly policy and in a just system would be illegal."

Another said that if a corporation "shoves enough 'critical work' down your throat, a manager will not be able to say yes [to discretionary time off]. So the corporation is in control of the amount of time off by setting unrealistic deadlines/workloads."

On Blind – billed as an anonymous community app for the workplace – the point was made that PTO is retained on the accounting books under compensation, added to the cost of labor.

"The company can't spend that money on anything else. Unlimited PTO has no accounting value, meaning the company is free to use that money for other things. Say you have a 100 employees with wages at $100/hr and they have 4 weeks vaca (160 hr), that's 100*100*160 = $1.6 Mil locked away. If you go to unlimited PTO, that's 1.6 Mil the company can spend on other things."

A fast track to stress and burnout? Possibly. As John The CPA concludes: "Good HR departments will keep track of the amount of leave taken by individuals under the new policy and compare it to the old policy to see the changes in employee behavior and how it can affect the organization."

Happening more and more

The popularity of such policies is growing, however. Job seeker site Glassdoor said in a report in July 2022 that more employers are offering unlimited paid time off and employees are asking for it. The share of benefit reviews mentioning unlimited policies increased from 3.7 percent in 2017 to 10.7 percent last year and 88 percent of employee reviews of unlimited time off policies in 2022 were positive.

The outcome of this shift can be a mixed bag for employees. It may help with managing the work-life balance and boosting morale. However, it also creates an environment with unclear expectations and puts the onus on employees to determine how much time to take off, which can lead to scheduling conflicts and workers being guilt tripped into pulling back on vacations.

According to recruitment services firm Zippia, employees at companies with discretionary time off policies often take less time off than those at organizations with traditional paid-time-off benefits, which can lead to more worker burnout.

A Microsoft spokesperson stressed that the policy only applies to US salaried staff. ®

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