The Pros & Cons of Unlimited PTO


Is unlimited vacation time right for your organization?

Posted on October 7, 2018

Wouldn’t it be nice if you had enough paid time off to live out a lifelong dream like hiking Machu Picchu or I don’t know...rest when you’re sick? Imagine having unlimited vacation days, where you’re paid for every working day of the year no matter what.

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It sounds too good to to be true, but believe it or not, unlimited paid time off is gaining speed across America—the country known for workaholism and zero mandatory vacation days per year. While the phrase “unlimited PTO” may scare employers out of their wits and induce pure euphoria in employees, there are two sides to this utopian coin. There’s no doubt that vacation time boosts productivity and engagement, but coming from someone who’s worked in a company with an unlimited PTO vacation policy, I can attest to its pros and cons from experience—plus a little research.

Read on to learn if an unlimited-paid-time-off vacation policy is right for your company.

Pros

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Attractive Hiring Incentive

Unlimited PTO is hard to say no to. If you make an offer to a highly-desirable candidate and they are between your company and a company with a standard vacation policy, other things equal, that candidate will accept your offer.

Shows Your Organization Values Work-Life Balance to the Outside

An unlimited vacation policy shows potential candidates and the press that your organization values work-life balance. If giving employees the power to decide when and for how long they’ll be taking off doesn’t say "work-life balance," then I don’t know what does.

Loyalty From Employees

According to an SHRM study cited in a Pschology Today article, employees who use vacation time are more loyal to employers and less likely to change jobs.

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Demonstrates Trust & Respect

Giving employees the power to choose their number of PTO days shows that you respect them as adults and trust them with the responsibility of choosing when they should and shouldn’t work.

Increases Productivity

Turns out, our brains actually need a vacation. Studies show taking a vacation increases creativity, productivity, and decision-making skills.

Saves Money

Unlimited PTO policies have caught a lot of traction because of the potential savings on the company’s bottom line. For many vacation structures, companies have to shell out serious dough to employees who resign with unused vacation time.

Flexibility

Startups and small businesses are the main users of unlimited PTO and these kinds of companies frequently have very young teams. This means employees are constantly buying houses, getting married, having children and traveling. Unlimited paid time off works with different stages of life e.g. weddings, children, graduates, etc. positioning your business as that much more attractive a workplace.

Cons

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People May Be Looking at Management as a Gauge

Without clearly-set expectations about taking time off, many employees are confused and worry they will take off too much time and risk looking lazy or like they take advantage of the company’s sweet policy. As a result, employees look to their manager as a gauge of how much vacation time is acceptable. In many organizations, especially startups, management often works crazy hours and takes little time off, as they are holding up the company as it grows, leaving employees with the impression that any vacation time means they aren't pulling their weight in the company.

Gives Employee Vacation Discretion

Giving employees paid time off to be used at their discretion sounds...crazy. Everyone will take off months at a time, right?

While it’s surprising how many people don’t abuse these policies, there’s usually a select few that take advantage of it, to the detriment of their jobs. Without clearly-set expectations, certain people will take advantage of the policy, leaving you understaffed or behind on work as company or team.

Overlapping With More People Out

Employees taking off at their own discretion creates greater opporunity for instances of people in the same team taking off at the same time. With a published approval process—either company wide or within departments—overlaps are easily avoidable.

Peer Judgement

The thing about unlimited PTO is that no one knows "how much it too much." Employees that don't take much time off sometimes judge or resent those that take more days off than them. Though often unbeknown to managers, unlimited PTO becomes a loyalty contest among coworkers where whoever takes off the least days is the most loyal. This may sound drastic but it happens frequently. Very subtly, employees start whispering around the office of so-and-so taking their third vacation of the year when in reality they may not know how much overtime that person works, what's happening in their personal life, or the amount of days off they need to stay well.

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Employees Feel Confusion & Guilt

As previously stated, without clearly-set expectations and guidelines for unlimited paid time off, employees often don't have a metric for how many PTO days are acceptable. For some, this causes extreme confusion and guilt when it comes to vacation planning. Vacation should be something that's looked forward to from the start, not a source of guilt or uneasiness about how your manager will feel when you hit the "submit" button on your PTO request.

Employees Take Less Vacation or None At All

Unfortunately, with unlimited PTO policies, some employees take less vacation days than they would with a more traditional policy or none at all. This drawback not only defeats the entire purpose of liberal PTO policies, but wreaks havoc on the employee because it's proven that we really do need vacations.

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The Bottom Line

Surprisingly enough, in many cases unlimited-paid-time-off vacation policies benefit businesses more than employees—not what you expected, right?

While unlimited vacation policies can and frequently are used in excess, the pros heavily outweigh the cons. InfoTrust tried unlimited PTO and tracked the outcome: employees took two to three weeks off on average with more one and two-day trips vs. week-long vacations.

With a few systems in place, unlimited PTO serves its intended purpose: promoting a culture of happier, healthier and more engaged employees. Here are a few factors to consider to ensure unlimited paid time off has its best chance of working in your organization.

Culture

The type of work and culture in your organization heavily determine the success of unlimited vacation time.

Unlimited PTO tends to work in companies where success doesn't hinge on the number of hours present. Many startups utilizing unlimited PTO are the types of businesses where progress and work completed is more important than the number of hours you were in-office. Likewise unlimited vacation will only work well if your culture is made of hard working, accountable people that are self starters and don't need to be told how to live.

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Efficient Communication & Approval System

When taking PTO, have measures in place so work runs as seamlessly as possible for clients and workers standing in.

Unlimited vacation time doesn't mean there's no tracking system or advance notice—people don't just not show up for work one day and call it "time off". You'll need to establish a system of accountability and communication so everyone knows who to send their PTO request to and how to coordinate with the rest of their team so no work is overlooked. A strong management team can easily set these measures in place so everyone knows protocol for taking off.

Required Minimum Days Off or Incentives

Believe it or not, some people are inclined to take no time off (the workaholics). While it's challenging to force people to stop working in the age of the Internet, you can set a required minimum days of vacation time. It helps give timid vacationers an idea of how much time off is acceptable and absolves any guilt or doubt around the question, "Does my employer really value my work-life balance?" Some companies like Evernote and FullContact even pay their employees to take vacation—in the form of a cash bonus that must be used on vacation.

About the author: Tara Caguiat is a marketing professional with a passion for blogging, travel and yoga. She frequently writes for Beach.com and her personal blog, SheNeedsLess.com.