Unlimited PTO – the Pros & the Cons

Posted by: Karen Booher on August 17th, 2022

If you are looking for an enticing benefit to attract talent, unlimited paid time off (PTO) is certainly one offering that tops the list. It’s a progressive policy that allows employees to take as many days off work as they need to or want to. It’s a concept that is both intriguing and terrifying to executive management and HR departments.

Unlimited PTO doesn’t mean getting a free pass to play hooky from work anytime you want. People are hired to do a job and they’re expected to deliver during work hours. But, with unlimited PTO, gone are the days of deducting 2 hours for a doctor’s appointment against a lump sum of PTO. Employees can take time off when needed for a personal appointment, to volunteer at their kid’s school, and to go on vacation.

Sound idyllic? Yes, it does. As long as it’s not taken advantage of, the work gets done, and it doesn’t create an undue burden on – or resentment from – the rest of the team.

Implementing an unlimited PTO policy is a big decision with plenty of pros and cons to be considered. Any benefit is hard to take away once it’s been offered, so it must be strategically and carefully thought through first.

A Few of the Pro’s

• It’s a great Recruitment and Retention Tool. While it is growing in popularity, it still isn’t a standard policy at most companies. Therefore, those companies offering unlimited PTO have a competitive edge for recruiting and retaining top talent.
• It Demonstrates and Builds a Culture of Trust. By adopting an unlimited PTO policy, you show employees that you trust them to manage their time off. This creates a culture of trust that can lead to improved employee morale and productivity.
• It Can Save the Company Money. If this policy isn’t abused by employees, it can save you money in the long run. When employees don’t accrue time off, employers don’t have to pay out unused, accrued time at the end of the year or the end of employment.

A Few of the Con’s

• Some Employees May Abuse the Policy. As the saying goes, “one bad apple can spoil the whole bunch”. It does open the door for some employees to abuse the policy, taking off many more weeks, or even months, from work compared to other employees. Abuse of the policy certainly could lead to resentment from those who are not abusing the policy.
• Paid Time Off Can No Longer Be Used as a Reward. With an unlimited PTO policy, you lose the ability to offer paid time off as a reward for continued loyalty and tenure. This could lead to resentment, especially from more tenured employees who may feel they deserve more perks than newer hires. They may not think it’s fair that they only had 2 weeks’ vacation for their first several years, and now new employees don’t need to pay their dues and start with unlimited vacation.
• It May Lead to Employee Burnout. Without a policy that pushes employees to take time off, there’s the potential that some won’t take enough and suffer burnout at work – exactly the opposite of what you are trying to achieve. After implementing an unlimited PTO policy, a team of PricewaterhouseCoopers authors wrote, “Some companies found that employees actually took less time off because they struggled to decipher what was acceptable in the absence of clear rules.”

Other Thoughts and Considerations

• Perhaps there are parameters you can build into your policy to avoid abuse such as a cap of PTO days, or a cap of PTO days taken within a certain timeframe. But, then the word “unlimited” doesn’t apply.
• Perhaps you may consider replacing the word “unlimited”, which implies self-indulgence, with “self-managed” or “flexible”.
• If you do implement an unlimited PTO policy, it’s important to remember compliance issues. You must clearly make the distinction between protected leave, such as under the Family and Medical Leave Act (FMLA), and PTO. PTO is meant for short-term leaves and vacations; not for serious, disabling illnesses.

In conclusion, unlimited PTO is certainly an interesting concept and one that may warrant further research and consideration by your company. Before making the jump, it is certainly best to consult with an employment attorney for help structuring and fine-tuning any new benefit, perk, or policy.

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Sources:

1. Glassdoor for Employers, “Why your company’s unlimited PTO isn’t working (and how to fix it)”, by The Glassdoor Team, July 22, 2022.
2. https://eightfold.ai/blog/unlimited-paid-time-off-policy/
3. https://blog.bqe.com/2019/08/19/unlimited-pto-the-key-to-productivity#:~:text=Unlimited%20PTO%20can%20also%20increase,stress%20and%20improves%20mental%20health