Enspira Perspectives
August 19, 2021

Does Unlimited PTO Work?

One of the first things a new hire will do when they receive the employee handbook is look at their paid time off (PTO) benefits. The more vacation and sick days allotted, the happier they are...right? It’s almost become a source of pride and gives 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: Take time off—with discretion. As much as you’d like. See your extended family, unwind and recharge…

But, like all theories, when applied in reality, there are pros and cons. Let’s take a look.

‘Unlimited’ Has Boundaries

Although companies are offering unlimited vacations or unlimited PTO, they put parameters around that. We’re not sure if this point is a pro or a con, but it’s an important one to note right at the start. These are generous policies (employees can take up to six weeks per year in some cases), but none of them are actually unlimited.

It looks like most companies offering unlimited PTO are open to flexibility and needs of  high-performing employees. But, if an employee isn’t meeting their targets, will they receive  resistance if they try to keep taking PTO? Either way, it’s essential that companies who offer unlimited PTO make the limits clear with their employees about how it works.

An Effective Recruiting Tool

The main reason employers offer unlimited PTO is its effectiveness as a recruiting tool. As we face increased staffing challenges (and often a decreased talent pool for a variety of reasons), we need to do everything possible to make our job posting the most attractive.

When two companies are offering similar compensation packages, offering unlimited PTO can seal the deal. Employees may readily acknowledge that they applied for a position or accepted a job because of the unlimited PTO.

The Problem of Underutilized PTO

Employers offering unlimited PTO are facing an interesting problem: employees are taking too little time off—even less than two weeks a year. And, in some environments, there’s pressure between employees to prove their loyalty by not taking time off.

We know that vacations and time off are essential for employee’s health and wellbeing, for work performance, and for overall morale. So, what do you do when you offer vacation time, and it stays on the table?

Some companies are setting a minimum required vacation time—usually in the range of two weeks off. Others have added policies that include taking at least a minimum of hours off, and requiring they take a specific number of consecutive business days off. These policies help to enforce getting completely away from the workplace.

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

Unlimited PTO can also offer cost savings at retirement and when downsizing. With this policy, employees don’t accrue unused vacations, so there’s no lump sum payout when they leave the organization.

Managing Unlimited PTO

When you have employees taking time off in pieces and blocks throughout the year, it can become a challenge to meet staffing needs and project deadlines. Every company that has broad PTO policies needs a system in place to track upcoming absences and ensure that the workplace continues to run smoothly.

There’s concern over employees who take months off on end. With unlimited PTO, companies are limited to what they can do if this happens. Tracking and reviewing PTO are important. So is dealing with those who take too little and those who take too much, especially if a leave approval process is involved

However, some companies have reaped an advantage: employees are spreading their time off throughout the year, rather than saving days off to use during the holidays. This disbursement of vacation days takes off some pressure during the major holiday seasons.

Employee Ownership and Empowerment

Giving employees the space to own their time management improves work-life balance. They can go to their child’s afternoon recital, schedule health check-ups and doctor’s appointments, and handle unexpected events without sacrificing their job or their sanity.

Employees that use their PTO can have better mental health, take care of their physical health, and experience less stress while balancing family needs and work needs. This results in deeper employee loyalty. There’s an inherent trust that goes along with an unlimited PTO policy. And employers tend to see higher productivity and engagement.

Disproportionate Utilization

This may be the biggest detraction to offering unlimited PTO. Employees will take advantage of time off at very different rates. When one employee is taking off weeks (or months) on end, and another hasn’t taken more than a day or two off all year, there’s bound to be a negative impact.

We know that utilization of PTO is as unique as the people in each workplace. This can lead to resentment, entitlement, and burnout from those who are working hard while their co-workers are away enjoying their PTO. In some cases, those taking justified PTO are stigmatized for doing so by those who don’t.

Unlimited PTO is Better in Theory than in Practice

It seems like the idea of unlimited PTO is very attractive—especially to new hires. But the practice of it isn’t working for employers or employees.

What’s the alternative? There’s good data about having mandatory vacation time. Doing so allows management some control over staffing, while ensuring employees get all the advantages of taking that much-needed time off. It also sets an equal standard where every employee with 4 weeks’ vacation (or whatever the company policy is) takes their 4 weeks’ vacation.

What remains is a need for some flexibility so employees can still take off those afternoons or take a long weekend when they need to. 

This article is part of Enspira’s exploration into the future of work. In the uncertain future of the workspace where any framework has yet to be established, Enspira is identifying and analyzing trends, inspiring courageous and intentional innovation and ultimately writing the tomorrow’s playbook for organizational success.

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