How to Determine If Unlimited PTO is Right for Your Company

Now that Millennials are making their way into the workforce, companies are looking for new ways to beat the competition and attract the best talent. They offer great benefits such as health, vision, and dental insurance, 401K match, flexible schedules, volunteer time off, and paid time off. Paid time off (PTO) is one of the main benefits young people look for when applying looking to start their careers, and unlimited paid time off has become even more popular. But, despite its popularity, only approximately 1% of U.S. companies have established an unlimited PTO plan. Some of the companies included in that 1% are Netflix, GE, Duo Security, and LinkedIn. Offering unlimited PTO has its pros and its cons, and these can help you find out if implementing an unlimited PTO plan is the right move for your business.

Pros

Offering unlimited PTO means trusting your employees. It shows that you trust your employees enough to eliminate the need to supervise them every day and have faith that they will do their job and meet deadlines. Implementing an unlimited PTO policy in your company means allowing employees to decide when to take time off and how much time to take without having to ask their managers for approval. The only requirement for managers is to make sure the employee is up to date and that the department will not be struggling during the employee’s absence. According to SHRM, the rationale is that employees will manage their own time well because it is in the best interest of their careers to do so. In order to compensate for having unlimited vacation time, employees usually work very long days each week to achieve the desired results.

Unlimited paid vacation time also boosts morale. When an employee doesn't have to fight to have a certain weekend off or wants to take a long weekend to unwind, or even just take an afternoon off to spend time with their family, then the employee can relax and perform well when they are at work. This also relieves the stress of having to plan out their PTO and having to budget in case they run out of PTO and happen to get sick, or are shocked by an unexpected emergency.

It is important to know that employees who are provided an unlimited PTO plan typically do not take any more time off than with their prior traditional plan. In fact, in some cases, they even take less time off. Studies have revealed that U.S. workers use on average 77% of their annual PTO hours. Studies have also shown that 69% of adults would be more inclined to take a new job if the company offered unlimited PTO.

Cons

One of the main cons of incorporating an unlimited PTO plan is that it can be tougher to organize and manage employee’s schedules since managers don’t know exactly when employees will decide to take time off. When an employee decides to take PTO, it affects the flow of work. For companies that have non-exempt employees, the need to make sure hours are covered without paying too much overtime can become very hard and even stressful. Also, because employees not always schedule their vacations ahead of time, there will be instances where managers will be able to approve certain employee hours but not others. This can result in confusion and employees’ feelings may even become hurt.

Another con is that some employees might take advantage of having unlimited paid vacation. Just like there are responsible employees, there are slackers. It is a good idea for managers to track who takes PTO, and when. Even though employees don’t always have to get their PTO approved by their manager, they do need to let them know. At the end of each quarter, managers should review who took PTO and how many days they were absent. This way, they will be able to see patterns and will be able to detect which employees are taking too much advantage of having unlimited PTO. Keep in mind, some employees may take use of a lot of PTO, but they also get their work done and meet their deadlines. So it is important to not only track PTO usage but also compare it with the work that gets done. For example, if a salesperson takes a lot of PTO during a quarter, the manager should look at the employee’s numbers and see how much they have sold.

When deciding whether your company should offer unlimited PTO, keep in mind that some jobs require people to be present. This can sometimes create tension between employees if some workers in certain departments are allowed more time off than others. Another thing to keep in mind is that not all employees will react favorably. An example of this is when Tribune Publishing established an unlimited PTO plan calling it “discretionary time off”. Instead of being grateful about this, employees took the announcement with suspicion, saying it removed the monetary value of the vacation days that long-term staffers have accrued. This resulted in staffers cashing out those days out when they left the company. In the end, Tribune Publishing decided to take away the plan due to backlash. This tells us that communication and preparation are imperative before implementing this kind of plan or benefit. If you are thinking about implementing one, make sure to talk to your employees. Send out a survey and allow your employees to give you their thoughts and feelings on the plan, this will give you an idea of how well the plan will work.

If you decide to implement an unlimited PTO plan in your company, make sure it links to your company’s culture. Your culture should be geared toward trust and teamwork. Also, be sure to provide guidelines explaining how the plan will work, and how employees will go about requesting their time off. If you already have a time and attendance software that includes leave management, then employees can request their time off through their employee self-service portal. Like mentioned before, unlimited PTO plans are not for every company, so do your research and talk to your employees before implementing one.

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