Unlimited PTO: Pros & Cons of Unlimited Vacation Benefits
Unlimited PTO policies have been a popular topic of conversation over the past several years as more and more organizations look for creative and affordable ways to attract and retain talent.
Though offering an ‘unlimited’ policy might sound great on paper, a well-executed program takes a lot more work than simply freeing HR of paid time off tracking and sending your workforce a quick email about the new initiative.
Before you pull the trigger on an unlimited paid time off policy, carefully consider these pros, cons and best practices.
Unlimited PTO Pros
So, what’s the big deal about unlimited paid time off? There are several reasons why adoption is on the rise.
One of the primary (though often overlooked) benefits of providing an unlimited PTO policy is potential savings incurred through losing accrued paid vacation time on your company’s liability sheet. Accrued time off is time that will potentially need to be paid out in some form if and when employees leave. Eliminating accrued time eliminates this pesky line item from your balance sheet.
Increase Admin Efficiency
Eliminating the need to track time off will take this burden off the HR team. Even if HR is using an HCM solution that helps automate the process, the team is inevitably fielding and approving requests and questions about remaining days, how accrual works, etc. Eliminating this take will make HR more efficient and allow that team to focus on more strategic initiatives.
Support Recruitment and Retention
Paid time off is consistently ranked as one of the most in-demand employee benefits. In fact, a recent Glassdoor survey found that nearly 80% of employees would prefer additional benefits over a straight pay raise. Adopting and showcasing an unlimited PTO policy can be an appealing perk for recruits and a powerful policy that helps retain your top talent.
Transitioning to an unlimited paid time off policy can boost employee morale and convey trust across the organization. Breaking down traditional barriers allows employees to control their own PTO destiny and take the time when they need it without the pressure of ‘use it or lose it’ policies or the disappointment of being a few days short for a holiday trip or vacation.
Prevent End of Year Vacation Sprees
Is your office a ghost town during the holidays? While this might not be a huge concern for some organizations, many companies struggle to juggle time off for employees that need to ‘use or lose’ their paid time off. It can be tricky to allow employees to take their hard-earned time off before they inevitably lose their days while also keeping your company up and running. Eliminate this concern with an unlimited policy—no need to worry about losing days if employees have the flexibility to take them when they actually want to.
Unlimited PTO Cons
Though unlimited PTO is appealing on paper, the concept does have its limitations. Carefully consider these potential roadblocks and prepare in advance for how to overcome issues.
Some Employees May Take Advantage
Though this is usually not the case (more on usage stats in a bit) there will always be a certain small percentage of the employee population that will try and abuse the system. Of course, you want employees to take time off, but you do need them actually working at some point. Having clear guidelines and processes for taking time off in place can help prevent system abuse.
Most Employees Take Less Time
Despite the initial purpose of encouraging employees to take more time off, unlimited vacation policies often have the reverse effect – employees take less time off, on average. Whoops. While some might file this in the ‘pros’ column, it’s important to remember that taking time off is essential for good mental health and avoiding burnout.
You Lose Vacation Time As A Reward
Do you ever use extra time off as a reward for tenure or employee performance? If so, that’s no longer an option with an unlimited time off policy. You’ll have to find new, innovative ways to reward your top performers.
There Are No Clear Expectations
One of the biggest issues with unlimited vacation policies is that there are often no clear expectations as to how much time is appropriate for an employee to take. When time off is defined, it provides clear boundaries as to what an employee can and can’t do. Strip away those boundaries and you risk employees taking way too much or way too little time off.
It Can Be Tougher To Manage
Since HR will no longer be in charge of tracking time off across the organization, it will fall to individual department or employee managers. This could be considered outside of the scope of what managers are expected to do and will be another item on their already full plate.
Unlimited PTO Best Practices
If you are leaning towards implementing an unlimited time off policy, be sure you have a plan in place to maximize the benefits of this unique offering.
Change The Name
Though ‘unlimited’ might sound appealing for recruitment efforts, this can lead to more hassle than it’s actually worth. Consider alternative names, like a ‘flexible’ time off policy or ‘preferred PTO’. Or, take a fun approach, as HubSpot did with their ‘two weeks to infinity’ policy, which also helps set expectations.
Provide Clear Guidelines
Just like a traditional paid time off program, an unlimited vacation policy should still have clear guidelines. Is there a limit on the total amount of consecutive days that an employee can take? Is there a minimum or maximum amount of days that an employee should take in a calendar year? Is there a minimum amount of days’ notice that the team or manager needs to consider and approve time off? These are all questions that need to be considered and communicated when rolling out the new policy.
Model Appropriate Behavior
Employees will often look to their managers or supervisors to set expectations for when and how to use their paid time off. Make sure that your leaders are also taking advantage of the generous new policy and that they are following all policy guidelines to take their time off. Employees might be hesitant to take time off if they don’t ever see their managers take time off, so make sure everyone is comfortable with and able to take days off, whether for a vacation or even just personal time.
Reward Actual Performance
Another roadblock for getting employees to actually take their time off is when a company rewards physical time in the office versus the actual impact of work completed. If your organization encourages long hours via rewards and promotions, it will be hard for employees to justify taking time off. What if they are scared about losing out on a promotion or annual bonus? Be sure that your incentive and reward programs are fair across the board and emphasize the impact an individual has on the organization versus the physical time they spend in the office.
Frame Benefits Around Core Values
Tie your unlimited paid time off policy and guidelines back to your company core values to bring everything full circle. For example, does your company value travel and exploration, or family time with a healthy work/life balance? Do you prioritize autonomy and accountability? These are all core values that can support unlimited vacation time. And, remember to communicate that unlimited vacation isn’t just for vacation; personal days, mental health days and even volunteer days are also important for an employee’s growth and happiness.
Of course, you should always be aware of any federal, state or local laws concerning paid time off and make sure your new policy abides by any requirements to make the switch.
Reduce Costs & Increase HR...
Resource Collection: ARPA & COBRA [rt_reading_time label="Read Time:"...
Top 10 Questions about the American Rescue Plan Act...