In 2019, unlimited PTO ranked as the top emerging benefit according to MetLife’s Employee Benefits Trends study. Researchers found that out of 2,600 employees, 72% wanted unlimited PTO. Workers desired this particular benefit above health and wellness plans and on-site benefits like medical clinics, gyms, and restaurants. This shows people place an incredibly high value on benefits that help create a better work-life balance.
But, how is unlimited paid time off beneficial to business owners? As the CEO of Kronos Aron Ain stated in a “View From The Top” interview, “I’ll tell you we started this policy in January 2016, and in calendar 2016, we had the best year we ever had. Our engagement went to levels it had never reached before. Our voluntary turnover went to the lowest level it’s ever been at.” Not capping vacation days is something many other top-ranking businesses like Hubspot, Roku, Dropbox, GE, and Netflix are seeing successful results with, too.
In this article, find out more about this benefit, how it works, the pros and cons of unlimited vacation, and how to implement a plan that works for your employees and your business.
What Does Unlimited PTO Mean?
Unlimited PTO is an employee benefit that allows workers to take as much time off as they deem necessary. This includes vacation days, sick leave, personal leave, and sabbaticals. However, any time taken off by employees cannot negatively impact the company. The business must still be able to properly function in a team member’s absence. This maintains production levels while providing employees with the opportunity to manage their work burnout, work stress, and work-life balance. In fact, productivity rates rise when employees take time to rest, recover, and restore themselves. A study conducted by Mark Rosekind for Alertness Solutions found that after a person takes time off, their performance can increase by 80 percent. It goes to show a well-formed unlimited PTO policy is mutually beneficial to both a business and its employees.
How Does Unlimited PTO Work?
In a typical PTO (paid time off) structure, workers are given a set number of days they can take off. This is normally coupled with a predetermined number of paid sick days, vacation days, and other absences. However, this is not the case with a company that implements an unlimited PTO policy. Employers give their workers more freedom to choose how many days they take off. For example, they could take two weeks off for Christmas and two weeks off for a summer vacation if this does not interfere with the company’s productivity levels.
Additionally, many traditional PTO policies allow employees the option of accruing or rolling over their unused days. For instance, if someone didn’t use any of their 14 paid vacation days for 2020, they would have 28 days of paid vacation in 2021. If these days aren’t used before a person leaves, retires, or gets let go, the business still usually “pays out” a person’s PTO days. Yet, with unlimited paid time off, there is no one “keeping track” of vacation days. Instead, employees have control over the time they choose to take off. This also means unlimited paid time off does not accrue or roll over.
Pros and Cons of Unlimited PTO
It should be noted that unlimited PTO doesn’t work for every type of organization. Strong leadership and a great team culture must be in place. If it isn’t, unlimited paid time off can cause adverse effects such as low employee retention, work burnout, decreased productivity levels, low profitability, and the inability to scale and grow. This is because leaders must first establish workflow and project management systems that support organizational values like work-life balance. When businesses fail to do this, this benefit results in disappointed and discouraged employees, production issues, and other serious problems. Before deciding if unlimited PTO is right for your business, learn more about the pros and cons.
Pros of an Unlimited PTO Policy
- Productivity levels increase when employees have the tools for a great work-life balance.
- Concentration levels rise when people feel well-rested, which can result in fewer mistakes and higher employee performances.
- Companies don’t “reward” people for staying at work throughout the year and not using their vacation days. This causes burnout and work stress, which negatively impact a person’s well-being and ability to do their job.
- Organizations become more profitable when employees are happy, healthy, and engaged.
- Businesses that actively support and encourage their employees to live a well-rounded life make team members feel taken care of.
- Workers feel like leaders trust their decision making and time management skills.
- The dissipation of micro managerial tendencies prevents toxic work cultures from developing. As a result, turnover rates decrease.
- Business owners attract top-tier talent since unlimited PTO is an employee benefit most high-performing, ideal team players want.
- Employees don’t waste time doing administrative tasks like tracking and managing vacation days and sick days. They can focus on doing work that matters instead.
- Companies don’t have to pay out a large sum for unused PTO that separated or terminated employees accrue over time.
Cons of an Unlimited PTO Policy
- Companies that don’t have the systems in place to support unlimited PTO discourage team members, lower morale, increase turnover, and decrease employee retention.
- Business owners and executives who don’t take any time off make team members feel like they can’t either.
- Unlimited PTO isn’t conducive when the team needs to meet a tight deadline or all work together toward a product launch.
- If a leader doesn’t practice setting boundaries and communicating expectations, some workers will abuse the unlimited PTO policy.
- There is no incentive for taking time off such as using up PTO days before they expire. A flexible unlimited PTO plan might actually have a negative impact on workaholics and perfectionists.
- Without a well-formed unlimited PTO plan, a high volume of absences can cause burnout, low productivity, and dysfunctional teams.
- Employees do not receive any payouts for unused days, which can make them feel like they’re getting the short end of the deal in unstable work environments.
- Office politics heat up when an executive or manager allows one team member to fully utilize their unlimited PTO, but doesn’t let the others.
- Coordinating a large number of unlimited PTO requests consumes the time of leaders who don’t practice delegation.
3 Techniques for Establishing Unlimited PTO
If the pros outweigh the cons for your organization, the next step is developing, implementing, monitoring, and making any needed adjustments to your business’s unlimited PTO policy. Use the three tips below to establish a strong foundation for a plan that benefits everyone.
1. Establish a System That Fosters Productivity and Work-Life Balance
Leaders need to make sure unlimited PTO doesn’t negatively impact the business. Creating a system that upholds expectations and boundaries is the best way of implementing this benefit. While this might seem too strict or authoritative, the purpose of unlimited PTO is to increase productivity and work-life balance. Without any rules, multiple absences collide, project deadlines and launches get missed, and employees find themselves more stressed and burned out than ever before. It’s important to remember organizations can be simultaneously flexible and structure-oriented. Flexibility doesn’t work in chaotic work environments.
When creating a system for unlimited PTO:
- Meet with your leadership team and brainstorm a set of rules around unlimited PTO. For example, how many weeks before a big vacation should someone communicate their absence with their manager and other team members? Are there any circumstances in which an employee cannot take time off, such as 24 hours before a huge deadline?
- Reverse engineer the reality of offering unlimited PTO. Where are there issues? Use problem solving skills to develop a list of the best solutions.
- Once this is finished, clearly define a procedure that employees must follow in order to take time off.
- Make sure team members receive this information during the onboarding process, as well as a hard copy of it in the company’s employee handbook.
2. Vocalize What Unlimited PTO Means During the Hiring Process
During the interview process, many candidates will ask about employee benefits. Even if they don’t, discussing your unlimited PTO policy is a good idea. Above all, don’t be vague. Provide as much information about what unlimited PTO means to the business, what the standard policy is, how much time employees usually take off, and the company’s best practices for unlimited PTO. This helps set expectations, while also opening communication channels around employee work benefits. Remember, this could be the difference between winning over a phenomenal job applicant or making them feel like the business doesn’t have real systems in place to support unlimited PTO.
In addition to leading the conversation about unlimited PTO:
- Describe why it’s important for employees to have a work-life balance.
- Give examples of what unlimited PTO does NOT mean to the business.
- Outline the measures employees must adhere to before taking leave.
- Explain why the organization moved from a PTO policy to an unlimited PTO policy.
- Share some of the awesome experiences employees at the business have had thanks to the company’s unlimited PTO policy.
3. Encourage and Support Employees to Take Time Off
As Simon Sinek, leadership expert and best-selling author of Start With Why writes in a Facebook post, “Leadership is not a rank, it is a responsibility. Leadership is not about being in charge, it is about taking care of those in your charge. And when we take care of our people, our people will take care of us.” Great leaders are guardians—they watch out for their team members and protect them from harm. For this reason, this particular benefit will not work in companies that don’t have strong leaders who develop “people first” work cultures. You must be vigilant about encouraging and supporting people to take the time off they need.
To practice strong leadership qualities when offering unlimited PTO:
- Discuss the signs of work burnout with employees.
- Regularly check in with team members to see how they’re doing. Although a person might say they’re great, this doesn’t mean they’re telling you the truth. Use your emotional intelligence to gauge each employee for signs of being overworked and overstressed (standoffish body language, tired eyes, and lack of energy).
- Encourage employees to take time off, even if they demand they don’t need it. Explain that the organization has systems in place that ensure the absence of one person isn’t detrimental to the business. Start small for employees who feel uncomfortable taking unlimited PTO by advising them to take a day off. Little by little, they’ll realize their leaders and team have their back.
- Talk about the benefits of taking time off. In addition to this, when workers get back from vacation or a leave of absence, ask questions about what they did and how it positively affected them.
- Set a minimum number of days a person must take off each quarter.
- Enforce rules around when employees can contact their coworkers who use their unlimited PTO.
- Communicate guidelines with directors, managers, and other leaders within the company to manage the systems the company puts in place.
Don’t Offer PTO if It Isn’t a Good Fit for Your Company
While it might be a desirable employee benefit, don’t feel pressured to provide unlimited PTO if it doesn’t work for your organization. This will only put the company and its team in a compromising position. There’s no shame in being realistic about unlimited paid time off not working for your company. This is better than moving forward with a policy that causes disappointment, disruption, and low productivity. Usually, unlimited PTO does not make sense for organizations that pay by the hour. The same can be said for newly launched companies or businesses that are scaling at an exponential rate. Nevertheless, meeting with your leadership team and discussing a viable PTO plan—unlimited or limited—is always wise before promising employees a particular benefit.
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