Who wins with unlimited paid time off (PTO)? The very phrase may cause employers to instinctively recoil in horror. Employees, on the other hand, might position it somewhere between free ice cream and no taxes on their list of concepts with intuitive universal appeal. A closer look shows that nothing is quite so simple. In practice, unlimited PTO has pros and cons for both employers and employees. Some companies have actually experienced employees taking less days off. A recent BBC article1 went so far as to refer to the whole concept as ‘smoke and mirrors’. Let’s take a look at the benefits and challenges, as well as a few keys to making it work.
Benefits of Unlimited Paid Time Off
Although the practice of offering employees unlimited PTO remains relatively rare, it’s growing in popularity. Microsoft, Adobe, Netflix, and even Goldman Sachs are offering it to at least some of their employees.1 A study by Glassdoor found that the policy was being mentioned in employee reviews 75% more frequently than it had been prior to the pandemic and that the majority were discussing it in a favourable light.2 The arrangement holds appeal to both employees and employers.
Staff Benefits of Unlimited PTO
Staff that are given autonomy to manage their personal lives will feel both valued and respected. Life is full of hurdles, including (but not limited to) parental obligations, health issues, and periods of bereavement. The ability to manage the time these hurdles demand on one’s own is empowering.
Staff may also use time off to pursue passions, seek work-life balance, and generally rejuvenate themselves by disconnecting from the office for a time. Not only is this good for employee well being, it can also boost productivity. As a bonus, staff will be less reluctant to take a day off when they’ve got the sniffles, potentially resulting in fewer germs spreading throughout the office.
Employer Benefits of Unlimited PTO
In addition to the aforementioned boost in employee productivity, organizations will simply have less to keep track of under a policy of unlimited paid time off. Tracking vacation days is an administrative hassle that can be reduced through a policy such as this.
The policy also renders moot the concept of accrued vacation. Days off are theoretically taken as needed, so employers won’t be burdened with paying staff members for unused vacation time.
Then there are the benefits to recruiting and retention. In a competitive labour market, an Unlimited PTO policy will help a company stand out, potentially giving them an edge.
Challenges of Unlimited Paid Time Off
For all of its appeal, there are drawbacks to Unlimited PTO as well. Challenges can be placed into two general categories; people using it too much and people not using it enough.
Staff Not Taking Vacation
By not defining the number of paid days off that staff are awarded per year, you’re eliminating both the ceiling and the floor. Absent this definition, people tend to look to their peers in order to establish informal norms. If company culture dictates, staff may actually end up taking fewer days off.
Peter Cappelli, Professor of Management at the University of Pennsylvania’s Wharton School of Business, summarized the problem to the BBC. “(Companies have) moved from a model where you accrue it- so you’re actually owed the vacation – to one where you kind of [have to] ask. And there’s nothing stopping your boss from yelling at you if you want to take additional time off – or punishing you if you do.”1
Staff Taking Too Much Vacation
Companies could potentially find themselves in the opposite situation, with staff members abusing the privilege of unlimited paid time off. This could place additional pressures upon other staff members who are forced to constantly cover for their absent colleague. Low morale or tension could result.
Succeeding with Unlimited Paid Time Off
Instituting Unlimited PTO will go more smoothly if companies use forethought. Consider taking the following steps before doing anything rash.
Assess your company. This type of policy tends to work better for results-based organizations who are already adept at effectively managing timelines. Companies that absolutely must have X number of warm bodies in seats on a given day may struggle with the format. Does this sound like you?
Structure the unstructured. Unlimited PTO is by nature untethered to the quantified limits that regulate other vacation plans, but that doesn’t mean that it should be rolled out completely devoid of policy. Alert staff that they are still required to request time off, as opposed to merely failing to show up for work.
Goldman Sachs even mandate their Unlimited PTO staff to take a vacation of at least five consecutive days off a minimum of once per year.1
Encourage foresight and teamwork. Staff members who plan ahead, work ahead, communicate with one another, and avoid unnecessary absences during crunch time will fare well with this structure. There’s even a theory that it encourages increased focus and teamwork, making for higher productivity in general.3
Determining whether unlimited paid time off is right for your organization requires careful analysis and consideration. The opinions of your staff should not be overlooked. Would they respond favourably to such an arrangement? Or would other considerations, such as more flexibility to work from home, find more favour? As more companies institute this policy, observers will be keen to see how they benefit, as well as how they handle the inherent challenges.
