Unlimited PTO? An employer’s knee jerk reaction ranges from vague skepticism to sheer dread. And, on the flipside, employees might automatically rejoice at the thought, picturing themselves rolling into work whenever they feel like it – and getting a consistent paycheck anyway.
But the reality of unlimited paid time off is really much more subtle – and there are substantial pros and cons for both employers and employees.
For one, the recent trend of unlimited PTO can be seen as a competitive advantage – a potential pro for employers. However, the practice has only been adopted by one percent of companies (1) – and some companies have tried it and returned to a defined PTO system. (2)
The success of an unlimited PTO program really depends on the pre-existing culture – and how well the program is communicated and modeled throughout the organization.
- Administrative efficiency. Not having to keep track of PTO eliminates one more employee metric that must be entered into a system and tracked.
- Cost savings. Accrued vacation time can be a liability on a company’s balance sheet. In addition, unused time may need to be paid out upon an employee’s departure.
- Employee flexibility. Many employees enjoy having scheduling flexibility and not having to define whether they are taking a “sick” day or vacation day when needed.
- Morale boost. Employees can be excited about the benefit and feel empowered with the level of trust afforded them to use free time at their own discretion.
- No clear expectations. Unlimited PTO can backfire when employees don’t know how much time to take. They may not end up taking much vacation at all, adding to stress and causing burnout.
- Overlapping vacations. Without a system to track vacation requests, too many employees may take vacation at the same time (such as during school vacations). This can put undue burden on the remaining employees, or impact project timelines and/or customer accounts.
- Lack of manager/leader modeling. Employees often look to managers and company leaders for models of how much vacation to take. If managers don’t take vacations, employees may not feel entitled to do so themselves.
- Resentment over lost accrued vacation time (funds). Switching from a PTO bank system to unlimited PTO may cause resentment if existing accrued time is not paid out.
Unlimited PTO is not right for every workplace. If trust and transparency are already strong traits of the culture, and a plan is put in place to set expectations with managerial support, unlimited PTO may be a good option for your company.
For a comprehensive look at everything from paid-leave offerings and vacation policy considerations to how to create a PTO-friendly culture, read our full Employers’ Guide to Paid Time Off.