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What is unlimited PTO?
The concept of unlimited paid time off (PTO) may sound too good to be true for many US workers. The idea is that employees can choose when and how often they take their vacation time, without limits imposed by the company. In a world where, according to Forbes, over half of US employees want increased flexible working options, could this be the solution?
Alongside a handful of other companies, tech giant Netflix pioneered the concept back in 2004. Since then, it has moved well beyond Silicon Valley, with many other companies following suit, including Sony Electronics, Hubspot, Dropbox, Workday, Glassdoor, Stitchfix…the list goes on. At Tiger, we’re beginning to see our clients in different sectors considering unlimited PTO. The question is, is it the right policy for your company?
How does unlimited PTO actually work in practice?
While it seems almost too-good-to-be-true on paper, unlimited PTO usually comes with guidelines or expectations in reality. These will vary wildly between companies and rely on mutual trust between employees and employers. Guidelines may specify a minimum number of days an employee must take per year, provide scope around when an employee can take time off, or how many people in a team can be on holidays at once.
When a company implements unlimited PTO, they may also ask employees to give their manager and team a notice period before going on a long vacation. This aids in the management of their workload and any handover needed to ensure the business continues to run smoothly. Companies may also implement training to help others take over work from those on leave.
If these guidelines aren’t in place, an employee could take advantage of an unlimited PTO policy, to an employer’s detriment. For example, they could leave the company in a situation where they’re understaffed and unable to complete the work needed. This may also be the case if holidays overlap within one team, leaving the remaining team members unable to work effectively.
Ideally, there would be a system in place to ensure any abuse of the unlimited PTO system is minimized. Whether through performance management or disciplinary action, this should be clearly outlined in the policy itself.
A policy which recognizes employees are human
An overarching benefit of unlimited PTO is that it allows employees to use their vacation time to suit their lifestyle. Every employee is different, therefore they require a different amount of leave. While one person may only wish to take a two-week vacation once a year, another may care for young children or an elderly relative and need more time off.
In the US, there remains no nation-wide requirement for companies to offer paid sick or carer’s leave.
If an employee works at a company where this type of paid leave isn’t available, they may choose to take their paid time off days to care for themselves or family members. An unlimited PTO policy would allow these workers to have the flexibility they need, without worrying about the consequences of taking too much time off, or having to take unpaid vacation time.
Another aspect of the policy worth mentioning is that it empowers workers to take control of their own PTO, boosting employee morale and instilling a sense of trust in the company culture. If an employee knows their PTO days aren’t being monitored, they feel a sense of responsibility which they may not experience in another company. A positive aspect of this environment can be an improvement to company retention rates, as workers may not want to give this up by moving to a new role.
Is unlimited PTO the answer to burnout and presenteeism?
While they’re slightly different, both burnout and presenteeism are issues plaguing the modern workplace. According to a Gallup poll, 23% of full-time employees report feeling burnt out at work often, while presenteeism costs employers three months per year in lost productivity.If an employee knows they have unlimited PTO days, they may choose to stay at home when they need a break or are sick, knowing they aren’t ‘wasting’ their set paid time off.
On the other hand, critics of unlimited PTO say it actually discourages employees from taking more leave. According to HR company Mammoth, moving to an unlimited PTO system meant the number of vacation days employees took on average remained the same. This sentiment was echoed by a study by Namely, which found employees with unlimited PTO took an average of 13 vacation days, compared to 15 days for their fixed PTO counterparts.
Therefore, if there are no set guidelines, or the communication around them isn’t clear, employees may feel guilty about taking holidays. This may be exacerbated if management isn’t seen to also take advantage of the policy. In addition, by not having a set number of vacation days, employees may not know what’s ‘acceptable’ in the workplace. This may result in them taking little to no holidays at all, thereby negating the benefits of PTO entirely.
Benefits of unlimited PTO for employers
Unlimited PTO may be considered by some as the ultimate benefit – which means it can be used by the company to attract the best staff.
If an employee is looking for a role that will allow them to have an increased flexibility, they’re likely to consider a role which lists unlimited PTO over one with limited vacation days.
In addition, as there are no longer set vacation days accrued by employees, employers are often not contractually obligated to pay out PTO days if that employee leaves the company. This can result in employers saving money from implementing the policy.
Will unlimited PTO work for your business?
Considering 41% of US workers don’t take any time off at all, unlimited PTO can be a great policy if it’s implemented and managed properly – but it will only work successfully in a company which recognizes the importance of taking leave and encourages its employees to do so.
In some companies with an unlimited PTO policy, unlimited PTO isn’t available for all employees. This may be because the company wants to use it as an incentive for those striving for higher positions, or they’re unable to implement it across all divisions within the business. If this is the case, it can create resentment and unhappiness within the company, leading to internal conflict.
Unlimited PTO is not a policy that will work in every workplace – but it certainly has its benefits, particularly around talent attraction and employer branding. Contact us today to find out how we can help you attract fantastic staff.