Unlimited leave might be a stretch for most, but it reflects a broader rethink about the relationship between time off and productivity.

Virgin boss Richard Branson raised eyebrows recently when he offered his corporate staff unlimited leave.

In an Australian context, the timing is interesting. It comes during a four-yearly review of modern federal awards, when businesses have been pushing to be allowed to force staff to take holidays during shutdown periods or if they have excessive leave owing, and let workers cash out their leave entitlements if they want to.

Few other Australian businesses are likely to follow Virgin’s lead though, say experts including Kate Boorer, an employee engagement and performance specialist who runs the consultancy Employerbility.

“Many workplace cultures are not ready for that conversation,” says Boorer, citing the financial pressures businesses are already under. “Resources are stretched and there’s a real burden if someone takes two or three weeks’ leave.”

More likely is a move to more flexible arrangements, with leave that isn’t unlimited but exceeds the regulated four weeks a year, she says. People could trade in pay for extra leave, and working from home could also increase.

Various models are already in play. Accounting firm Ernst & Young has had summer leave policies that allow employees extra days off to prepare for Christmas.

Ernst & Young research indicates there may be some merit in Branson’s approach. In a 2006 study of the firm’s own employees, it found that, for each extra 10 hours of holiday they took, annual performance ratings went up 8 per cent on average. And employees who took regular holidays were much less likely to leave the business.

At GE, it’s one of the reasons that employees who take their full leave in one year get a fifth ‘free’ week of leave the following year (a practice also aimed at running down the accumulated leave bill).

One often overlooked benefit of staff taking leave, says David Arkell, GE’s head of HR in Australia and New Zealand, is that other employees may be temporarily handed their role and have an opportunity to take on more responsibility or learn new skills.

The downsides of cashing out leave

The current push to allow workers to cash out their leave and have fewer days off is ill-advised, says Justine Turnbull, an employment law expert and partner at Seyfarth Shaw. 

“I’m philosophically opposed to that. From an HR perspective, I believe workers should take their leave,” she says. “But from a financial perspective, sometimes it would be a better benefit to workers if they could cash out.”

Strongly encouraging workers to go on holiday could reduce burnout and, according to a long-running cardiovascular study by Boston University and the US National Heart, Lung and Blood Institute, extend their lives.

The reasons why holidays boost productivity could be both physical and mental. It’s now known that, even when the brain isn’t actively engaged, it’s always busy. It’s often sorting meaning, processing information and recalling things from the day. Taking holidays, or even regular breaks at work, may enable the brain to do more of this – particularly in a world where, thanks to technology, people can be always connected.

Regular breaks appear to be the key to reaping real benefits. A recent study by Dutch researcher Jessica de Bloom showed that, among people taking a holiday of between seven and nine days, their feelings of renewal dissipated within about a week of going back to work.

The benefits of regular days off were tested in a four-year Harvard Business School study led by Professor Leslie Perlow. Working with Boston Consulting Group employees, the researchers looked at what happened when they were given scheduled days off – such as a day a week or a day a fortnight – where they were completely ‘off’ and not connected via phone or email. Five months into the research, the employees reported feeling more satisfied with their jobs, more content with their work-life balance, more likely to see a long-term future at the company, and prouder of their achievements.

Are all holidays the same?

If organisations want employees to return from holidays refreshed and relaxed, they may do well to provide services to help workers plan their holiday in advance.

In a 2014 survey by Expedia, only 22 per cent of Australians reported feeling stress-free on holiday and being able to ‘let their hair down’.

Research by Shawn Achor, a Harvard University lecturer, could help the remaining 78 per cent feel more of the bliss. In a collaboration with the Institute of Applied Positive Research, Achor showed that not all holidays are equal in terms of employee renewal.

“Most of the happiness gleaned from a vacation is dependent upon the stress level of the vacation,” says Achor in a Harvard Business Review article on the research. “Poorly planned and stressful vacations eliminate the positive benefit of time away.”

This article is an edited version. The full article was first published in the December 2014/January 2015 issue of HRMonthly magazine as ‘All work and no play’. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here.