Unlimited PTO, meaning the ability to take as many paid vacation days as needed or desired throughout a year, has grown in popularity over the past decade, especially for startups and small businesses trying to attract and retain talent. Although it may sound like a great deal for employees, there are downsides, especially if business owners and managers aren’t carefully monitoring their company culture.
So, how does unlimited PTO work, what does unlimited PTO mean for employees, and what are unlimited vacation policy pros and cons? We’ll break down the advantages and disadvantages for both employees and employers to help you decide if this policy is right for your business.
What is Unlimited PTO?
Unlimited PTO stands for unlimited paid time off or unlimited vacation policy. Companies that offer unlimited PTO have no limit on the amount of paid time off or vacation days available to employees. Depending on a company’s unlimited PTO policy, some restrictions may apply on how and when time off can be booked.
Does it sound too good to be true? You might be wondering if unlimited PTO is a trap?
In its best form, an unlimited time off policy promotes work-life balance and offers employees an added perk that may help attract talent and reduce turnover. But when managed poorly, unlimited PTO can actually cause more burnout, increase stress, lead to less time off overall, and lower trust across an organization.
Let’s go over the pros and cons of this type of time off policy.
The Pros and Cons of Unlimited PTO
1. PRO: There’s no need to worry about running out of vacation days
Let’s begin with the obvious—unlimited paid time off means employees don’t need to worry about running out of vacation days.
There’s no need to plan out the whole year in advance or worry that you’ll run out of days before the year ends. Employees who have unlimited paid time off won’t have to say no to an event later in the year or hold back from taking a much-needed personal day for worry of not having enough days left for their vacation.
2. CON: Company culture may not allow for unlimited time off
Unlimited paid time off only works if the company culture allows employees to take a reasonable amount of time off. Competitive workplace cultures that have their employees continually ride on the edge of burnout may cause their employees to build up a mindset that taking vacation time is lazy, weak, or selfish.
When employees are continually pushed to the max and are under a lot of pressure, they may look down on or ridicule other team members for taking time off. After all, taking time off could mean the rest of the team has even more work to do on top of an already overburdened schedule.
There’s absolutely no point in offering unlimited PTO as a perk if you have a competitive workplace culture that already doesn’t allow employees to take a reasonable amount of time off. If this is the case, take a close look at your company's values and what you are currently doing to invest in your company‘s culture. You may need a complete overhaul of your policies, and your company may require a mandatory vacation policy at first to break that competitive, “ABC: Always Be Closing” mindset.
3. PRO: Sufficient time off can lead to increased productivity
Offering more vacation time may seem like a downside or a loss to business owners, but in actuality, time off can lead to increased productivity.
Employees who take adequate breaks and prioritize work-life balance are more productive. They are able to achieve more in less time while producing better work. They work better with team members, and they make fewer mistakes. These employees will also be happier and healthier, which reduces the risk of burnout, prevents illness, and reduces sick days.
4. CON: There may be too much work to take time off
If employees feel like they have way too much work to be able to take vacation time, they won’t be able to utilize their unlimited paid time off. When there’s too much work to go around, taking time off can feel pointless because an employee may feel like taking a vacation will just mean more work and stress once they return.
To combat this feeling, employers and managers must monitor and manage a team's workload, as well as each individual’s capacity, to ensure there’s an achievable amount to go around. No one team member should have to take on an unreasonable portion of the work, and everyone on the team should feel like they have time to take a break—and that their company supports them in doing so.
5. PRO: No unused or accrued vacation days to worry about
Tracking used and unused vacation time is a burden for both employers and employees. When vacation time is unlimited, managers and HR teams don’t need to track vacation days or carry over vacation time from the previous year. After all, having a specific allotment of vacation time means a company must have additional policies in place around what happens to leftover vacation time at the end of the year.
Do vacation days roll over to the following year if they are unused? How many days of vacation can an employee roll over into the following year? Is unused vacation time paid out at the end of the year instead, or is it mandatory that employees use up their allotted vacation time by the end of the year?
There are many possibilities available, and each option creates additional HR work and may cause confusion in the workplace.
6. CON: There’s pressure on employees to decide on the right amount
Unlimited time off means time off is always open-ended, which means navigating an unlimited PTO policy is up to the employee’s discretion. This can put added pressure on team members to decide what a reasonable amount of vacation time is.
Do they stick to what they had at their previous place of employment? Do they take a couple of extra weeks off to make the most of the perk? Or do they (unfortunately) end up taking fewer weeks off to prove their stamina and show that they are not taking advantage of the policy?
Leaving it entirely up to employees puts a lot of pressure on them, and depending on the person, it may be quite stressful to make decisions around what’s a reasonable amount of time to take off work.
7. PRO: It’s an attractive perk for retaining and attracting talent
Unlimited paid time off is a flashy perk that may help you retain and attract talent. No matter the strength of your policy, it can seem like quite a fancy add-on when an employee is weighing their options on where to work.
If the other job they’re considering offers two weeks of paid time off versus your unlimited paid time off, you already have a leg up on the competition.
The better you manage this policy, and the more employees feel like they are actually able to make the most of this perk, the greater your benefits of retention and talent attraction will be.
8. CON: It can be difficult to schedule and reduce vacation overlap
More vacation time will equal more scheduling—there’s no getting around that.
Even though taking these much-needed breaks can aid productivity, there may still be conflicts with scheduling. Having one or two team members book off the first week of July is manageable, but what happens if the entire team is hoping to have that week off?
Unlimited paid time off must have clear policies around when and how employees book their time off to ensure there isn’t too much overlap across the organization. You must be clear about how and when to book time off and how many people are able to book time off at the same time.
9. PRO: Employees gain freedom, and mutual trust is built
Unlimited time off is a policy built on mutual trust. It illustrates to employees that you trust them to make decisions surrounding their vacation time and what they need to achieve work-life balance. You are providing freedom and flexibility, something that’s often highly desired by Millennial and Gen Z workers.
10. CON: In rare cases, employees may abuse the policy
There are cases when an unlimited vacation policy can be abused by employees. Although this could occur, it’s not something employers should have to worry about if they’ve made strong hiring choices and have built mutual trust across the organization. Unlimited PTO companies must trust each other in order for the policy to be effective.
The Bottom Line: Is Unlimited PTO the Best Policy?
Depending on the culture and operations of your workplace, jobs with unlimited PTO can be a blessing or a curse. Employees need to feel like they are able to take an adequate amount of time off, which means as much or more vacation time as they would get with a traditional vacation policy.
Companies with unlimited PTO must ensure that the policy is actually looked at as a perk by team members and not as an additional burden on them. This type of policy works best when an organization effectively manages a team's workload, has built mutual trust, and there’s a mutual understanding of the value of taking time off.
Additional Paid Time Off Resources
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