Is Unlimited PTO Right for Your Company?

04-16-2019
Terra Vicario

You’ve probably heard of unlimited paid time off (PTO). Maybe you’ve rolled your eyes at it. And perhaps you’ve wondered: Do any companies — that aren’t tech startups — actually, have unlimited PTO)? Is this really a thing?

It’s a thing. Just not a big thing. About 2 percent of U.S. companies offer unlimited PTO. Which begs the question: Could such a policy work at your organization?

Let’s start with an obvious point: Unlimited is not really unlimited. So what is then? Here’s what you need to know when considering such a policy:

Money Matters

Under traditional PTO plans, when employees leave your company, you must pay them for accrued PTO time that they didn’t use. Not so under limitless PTO. Therefore, when pondering unlimited PTO, you might want to examine how much you typically pay departing employees per year for unused time off. An unlimited PTO approach may end up saving you money.

Potential for Abuse

Too many employees and candidates, unlimited PTO sure sounds like a great idea. Who wouldn’t love a bottomless bucket of vacation days? After all, why wait until retirement to take a four-month cruise? Why not lounge all summer at a pool?

Ha! As if! The truth is, no one is really thinking in such extremes. Besides, the reality is that, regardless of policy, employees are reluctant to take off days — 41 percent of Americans take no vacation at all. What’s more, the majority fails to take even half of their allotted vacation time.

If people aren’t taking the two, three, four, or however many weeks they’re permitted now, it’s highly unlikely that they will suddenly be away from work for months at a time under an unlimited PTO framework. In other words, if you’re worried about people abusing an unlimited policy, you rest easy. (If anything, you should probably be more considered about work martyrs.)

Employment Branding

Why consider unlimited PTO, then? Because unlimited PTO isn’t necessarily about people actually taking advantage of ot it.

A key aspect of the policy is its power as an impactful retention and recruitment tool. Indeed, research shows that 51 percent of candidates would take a 10 percent cut in pay if they had unlimited PTO.

Unlimited PTO serves mainly as an employer branding element to convey culture. It signifies to candidates and employees that your business is progressive, values work/life balance and believes in treating people like adults.

Tracking Issues

If you’re like a lot of companies, you can get mired in tracking different forms of PTO — sick days, vacations, parental leaves, holiday, bereavement, etc. Unlimited PTO can eliminate the administrative burden of documenting and monitoring various classifications of hours. (In fact, Ask.com claims that its unlimited policy saved it 52 hours a year in administrative time.)

Then again, you might consider not tracking PTO at all.

What? That’s HR blasphemy!

It sure is! But keep in mind that information is only as valuable as you make it, so ask yourself: What will I actually do with knowledge about how many days employees are taking off?

If such details will truly impact business decisions — for example, to help inform staffing on a seasonal basis — then it might make sense to keep an eye on PTO usage. But if such information will tumble into a black hole already teeming with big data you’re not sure what to do with, then it hardly makes sense to monitor usage.

Measuring unlimited PTO days also risks stoking employee paranoia that you’re judging people based on how many days they take. They may also start benchmarking their usage against that of colleagues. Ironically, people may feel less comfortable taking PTO than they would under a conventional plan. (Though regardless of approach, you’re better off appraising people based on results, not whether they’re sitting at their desks.)

Don’t Forget FMLA

And there are the legalities. The main one to keep in mind is the Family and Medical Leave Act. Especially given the relative rarity of unlimited PTO policies, there’s no true best practice about how to integrate FMLA with them. (That’s code for speaking to an employment attorney before you implement such a policy.)

Nonetheless, given that employers who are subject to FMLA must provide up to 12 weeks of unpaid leave to eligible workers, you must initially decide whether you will pay people during this time. Next, consider enforcing FMLA leave, rather than PTO, when people qualify for it. Yes, this would be a technical exemption to an unlimited policy, but it can help you stay compliant.

Unlimited PTO Unplanned PTO

Just because there are no constraints on the number of days doesn’t mean there should be no constraints at all. You should expect employees to work with their managers and teams to ensure that work gets done efficiently and effectively. (Essentially the same suggestion regardless of PTO policy.)

Whether that means using a shared calendar or other collaboration tools, it’s important to ensure high levels of communication to make the right preparations. It’s therefore essential to provide guidelines around giving advance notice and request procedures.

For example, you might consider requiring employees to give at least one month’s notice before taking off stretches of three or more days. You might also implement protocols to make sure that necessary colleagues are up-to-date on work before an employee take a vacation.

Of if you’re feeling particularly ambitious, you could adopt a plan similar to Virgin’s “policy-that-isn’t.” The company allows all salaried staff to take days without approval. (Yes, more HR blasphemy!)

 

Ultimately, an unlimited PTO policy must be steeped in trust. It won’t work in a culture that currently fails to give people sufficient autonomy. And it won’t work if it’s used solely as a recruitment tactic. If what you put on paper doesn’t match your practices in reality, then the policy will backfire as employees become cynical and disengaged.

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