Ten years ago, unlimited vacation was all but unheard of. Now it seems like all the cool companies are doing it—but should you? As with many business trends, unlimited vacation has its roots in Silicon Valley, but has quickly spread from coast to coast. There are lots of philosophies swirling around about the wisdom of an unlimited vacation policy. Some leaders feel that it helps attract top talent. Others think it’s too permissive, and worry about how the policy will affect productivity. Employees have mixed feelings as well. If you’ve ever wondered if an unlimited vacation policy would work in your organization, read on to learn more about the pros and cons of this flexible attitude toward time off.

How Unlimited Vacation Benefits Employees and Organizations

Work-life balance is a tricky issue. Life isn’t always neat and tidy, and more and more people are finding that their lives don’t fit into a 9-5 schedule. Unlimited vacation is one of the growing flexibility perks that modern companies are using to woo top talent. The benefits to employees are obvious. They have the freedom and flexibility to get time off for an appointment, a trip, or a mental health day makes work a lot less stressful. Everyone is different, and this flexibility allows for different work styles and stress levels. These benefits come back to the employer as well. Happier employees have higher engagement rates and are more productive, innovative individuals when they’re on the job.

How the Policy Saves Employers Money

Unlimited vacation policy can actually save employers money, and the reason for this is simple. It is called accrued time off. When employees accrue days off, and don’t use it, the company must pay for the unused hours. With unlimited time off, there’s no payout, no matter how many hours went unused. That can save companies a lot of money over time.

Industry Matters

Tech startups are the pioneers of unlimited vacation, but there’s a good reason behind this: they don’t usually have time-sensitive issues to worry about. Workers in healthcare, customer service, and food services provide more reactive work, and can’t be as flexible. Industry may not dictate culture, but it can affect how well certain policies work in each organization.

How Much Vacation do Employees Take?

In general, most employers find out that people don’t take much more vacation than they did before the unlimited policy. This is typically 2-3 weeks a year, excluding holidays. Rarely do organizations see employees abusing the unlimited vacation policy. When they do, it’s easier to deal with the problem on an individual level. Many companies have stipulations about how much notice is needed and how close together the vacation periods can be, in order to help prevent policy abuse issues.

Common Pitfalls

Of course, there are some downsides to a policy that allows unlimited time off. For some organizations, the stipulation that you can “take off as much time as you want as long as the work gets done.” This leaves a lot of room for overworked employees to forgo vacation altogether, resulting in burnout. An unlimited amount of time off can also create a muted competition in the workplace, about who is taking the least time off. Other employees feel that if they don’t take advantage of the time off, they are losing out.

As an employer, it’s important to emphasize through transparent communication that taking time off will not be penalized. Additionally, employees who don’t take time off won’t be given special treatment. While it is important to have a productive environment, part of that is making sure employees are rested and not stressed out. Some companies fight these common problems by creating a policy of “minimum” vacation, meaning employees MUST take two weeks off per year—but are free to take more.

Deciding on Your Company’s Vacation Policy

Making decisions about your company’s vacation policies is rarely easy. The good news is that you don’t have to decide all at once. Go ahead and test out an unlimited vacation policy before you put it in ink, that’s definitely an option. Unlimited vacation might be one of the hottest trends in employee benefits, but only you can decide what works best for your organization and your team.

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Andrew Deen has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He is currently writing a book about scaling up business and his experience implementing lean methodology.