Does Unlimited PTO Work?

Paid time off (PTO) benefits are one of the first things a new hire will zero in on. PTO has almost become a source of pride and bragging rights: “Oh, you only get 20 days? My company gives us 25.”

By this logic, the ultimate goal of a company might be unlimited PTO. But, as with most things that seem too good to be true, there are pros and cons to consider.

‘Unlimited’ Has Limits

Although some companies do offer so-called "unlimited" PTO, it's worth noting that parameters always remain. These may be generous policies--employees can take up to six weeks per year in some cases--but few are actually unlimited.

Rather, most companies who claim to offer unlimited PTO are signaling they're flexible and receptive to the needs of high-performing employees. But if an employee isn’t meeting targets, does the PTO policy still apply? It’s essential that companies offering unlimited PTO clearly articulate to employees how the policy works.

An Effective Recruiting Tool

Unlimited PTO can be a valuable recruiting tool--which is one of the main reasons employers offer it. As companies continue to struggle with staffing challenges (especially hiring top talent) in an increasingly complex labor market, they're doing everything possible to attract promising candidates. When two companies offer similar compensation packages, unlimited PTO can seal the deal.

Managing Unlimited PTO

When employees take time off in big and small blocks during the year, meeting staffing needs and project deadlines can become a challenge. Every company with broad PTO policies needs a system in place to track upcoming absences and ensure workplace continuity.

However, employees spreading their time off throughout the year, rather than saving it for the holidays, can mitigate staffing issues during major holiday seasons.

What about employees who take months off on end? With unlimited PTO, companies' hands can be tied in this case. That's why tracking and reviewing PTO are important--especially if a leave-approval process is involved.

‍The Problem of Underutilized PTO

Some employers face a different dilemma: employees who take too little time off—sometimes even less than two weeks a year. In some work environments, there may be pressure among employees to prove their loyalty by not taking time off.

We know time off is essential for health and wellbeing, work performance, and overall morale. So, what to do as an employer when vacation time goes unused?

Some companies are setting a minimum amount of required time off—usually around two weeks. Others have added policies that mandate a minimum of hours off, and a specific number of consecutive business days off.

It helps when management sets the standard. Employees are more likely to take time off when they see managers taking their own vacations. Setting expectations is essential to ensure unlimited PTO is fair and equitable across the board. 

Unlimited PTO can also offer cost savings at retirement and during downsizing. As employees don’t accrue unused vacation days, there’s no lump sum payout when they leave an organization.

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Employee Ownership and Empowerment

Giving employees the space to own their time management improves work-life balance. They can attend children's afternoon recitals, daytime doctors' appointments, and manage unforeseen emergencies without sacrificing their job or their sanity.

Employees that use PTO can be healthier both mentally and physically, and and less stressed about work-life balance--which helps engender employee loyalty. There’s an inherent trust that comes with an unlimited PTO policy that often cultivates higher workforce productivity and engagement.

Disproportionate Utilization

Arguably the biggest drawback of unlimited PTO policies is disparity in how employees use them. When one employee takes weeks (or months) off on end, and another hasn’t taken more than a couple days off all year, it can easily lead to workplace friction. In some cases, employees who don't take justified PTO resent those who do.

Unlimited PTO: Better in Theory than Practice

Unlimited PTO as a theory is very attractive—especially to new hires. But in practice, it rarely works for employers or employees.

What’s the alternative? Mandatory vacation time is one viable alternative, with solid data that supports its viability. It allows management some control over staffing, while ensuring employees enjoy the advantages of much-needed time off. It also creates parity among employees in terms of time away from work.

What remains is a need for some flexibility in the workplace, so employees can still take off an occasional afternoon or a long weekend when they need to. 

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This article is part of Enspira’s ongoing exploration of the future of work. In an ever-evolving employment landscape where long-accepted workplace norms are shifting rapidly, Enspira is identifying and analyzing trends, inspiring intentional innovation, and ultimately, writing tomorrow’s playbook for organizational success.