Unlimited PTO: Is It Right For Your Workplace?

by | 22 May, 2019

Sign up to The Compass for Monthly HR News, Tips & Trends!

We respect you and will never sell your information.

As summer approaches, we are entering the busiest time of year for people looking to go on vacation and take time off of work. This season often leads employers to consider their time off policies, and whether or not a change to the time off policy could be made that would better serve both employees and the business.

Most employers offer some form of paid time off, or PTO. The average number of PTO days for private sector employees who have completed one year of service hovers around 10 days. Offering paid time off is a very smart move for employers, as it helps to combat employee burnout and can also serve as a great tool for employee recruiting and retention. In fact, 81% of people who have PTO consider PTO a critical factor when evaluating a job offer.

A recent trend for time off policies is the unlimited paid time off policy. This type of policy is still relatively rare, with one survey finding that only 3.4% of full-time workers with PTO have an unlimited PTO policy. Still, as this type of policy gains traction, employers are questioning whether or not such a policy could be beneficial or detrimental to their workplace.

Benefits of Unlimited PTO

Companies that are opting to offer unlimited PTO are doing so for a reason- there are a number of benefits that come with such a policy, including:

Improved employee morale and productivity. According to one study, 95% of human resource leaders say that employee burnout is sabotaging their workforce. A great way to combat this burnout is to ensure that employees have ample opportunities to take time off and recharge. With an unlimited PTO policy, employees have more freedom to take time off when they need it without the hesitancy to save time off strictly for traveling vacations. When employees are less burnt out, their productivity will improve, which ultimately drives up the company’s bottom line.

Improved culture of trust. Fostering a culture of trust between management and employees is so important, and offering an unlimited PTO policy is a way of expressing that employers trust their employees to take time off as needed without abusing the policy. This sense of trust will permeate the rest of the company culture.

Savings for the company. With a typical PTO policy, employees often have unused days at the end of the year. If an employee retires or quits, the employer is typically required to pay out those unused days. With unlimited PTO, there is no accrual, so the employer has no obligation to pay out unused days, which can end up saving the employer a lot of money.

Improved recruiting and retention. As mentioned before, paid time off is a huge benefit that employees look for when considering a new job. Offering unlimited PTO will be very attractive to potential employees, and it will also serve to keep current employees satisfied.

Potential Drawbacks of Unlimited PTO

Despite the many benefits of offering unlimited PTO, employers need to be wary when opting to offer this type of policy. Offering unlimited PTO is not right for every organization, and there are some potential drawbacks, including:

The potential for employees to abuse the policy. Offering an unlimited PTO policy requires a high level of trust between employer and employees. Of course, there is a chance that employees will abuse the policy and take excessive amounts of time off, to the point that they fail to get their work done and negatively impact the team.

The potential that employees end up taking little to no time off. In some cases, having unlimited paid time off can actually lead employees to take less time off, as there is less structure around how much time off they can and should be taking. This can be exacerbated by management who rarely takes time off, setting an example that taking time off is frowned upon.

Logistical challenges. When employees have unlimited PTO, the chances of several employees taking time off at the same time are increased. If this occurs, it can lead to strain on the rest of the team members, and the company as a whole.

Best Practices for Unlimited PTO

After considering the benefits and potential drawbacks of an unlimited PTO policy, it is ultimately up to employers to decide if such a policy is right for their workplace. For employers that do opt to adopt this policy, here are some best practices:

Maintain a time off request process. Just because there is an unlimited PTO policy does not mean that employees should be able to simply take time off whenever they please. There should still a process in place where employees must place a request for time off to be approved by the employer. This can help alleviate the likelihood that too many employees will take off at once, and also helps employers track who is taking off how much time, and when.

Ensure that management sets an example. If there is an unlimited PTO policy and management rarely or never takes off, lower level employees will see that as the standard and may feel uncomfortable taking time off themselves. To ensure the policy fully benefits workers, there should be buy-in from upper management, who should take occasional time off to show that it is healthy and expected to do so.

Incorporate more feedback and performance reviews. Adopting an unlimited PTO policy means there needs to be a level of trust that employees will still get all of their work done. It is a good idea to incorporate more formal structures of employee feedback and performance reviews, to establish checkpoints for the purpose of ensuring that the team is still hitting targets and getting the work done regardless of how much vacation time they take. If performance starts to slip, management can intervene, and possibly set some more parameters around how much time can be taken off, and/or when that time can be taken off.

Want to learn more about how Navigate can help with matters such as this? Contact us today to request a free HR consultation.

Tom DiSilva
Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design. He is an active member of The Society for Human Resource Management (SHRM), The National Association of Professional Employer Organizations (NAPEO), Professional Association of Co-Employers (PACE), and The American Payroll Association (APA). He is deeply committed to giving back to the community both personally and through Navigate Cares, which provides support for several nonprofit organizations such as the USO, The Boys & Girls Club, and the 3Point Foundation.

Continue reading helpful HR articles from Tom.

Navigating A Post-Pandemic Return To Work

As we see restrictions starting to lift, we’re seeing companies start to send their employees back to work in the office as long as it’s safe to do so and a proper risk management plan is in place.

Providing Help for Caregivers Within the Workplace

An estimated 1 in 6 working Americans today support their parents or another member of the elderly community. Read how to invest in employees that are in an unpaid caregiving function at home that you might not even be aware of.

Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.