Unlimited paid time off (PTO) is a policy that companies can offer that allows employees to take as many paid days off work as they want each year. Unlimited PTO encompasses sick time and vacation time, so employees don’t have to worry about how many sick days or vacation days they have accrued.
However, unlimited PTO doesn’t mean that employees can take off whenever they want or simply not show up for work. Most companies still require that employees have their time off approved by managers, and employees need to ensure that their productivity does not suffer as a result of time off.
Benefits of Unlimited PTO
An unlimited PTO policy can have significant benefits for both employers and employees. Here are a few of the key advantages of an unlimited PTO policy.
More flexible schedules
With an unlimited PTO policy, employees are judged based on how much work they get done, and not how much time they spend at their desks. Employees who want to take a long vacation can work extra hard the prior week, then fully disconnect after finishing a big project.
Employees know that if they get their work done efficiently, they can use the saved time to take a day off afterward. That provides an incentive for employees to be more productive.
If employees are feeling burned out, they don’t have to worry about how many vacation days they have left. Instead, they can simply take a day off to disconnect and then come back to work feeling refreshed.
Offering an unlimited PTO policy is a way to build trust between your management team and your employees. Employees are empowered and entrusted to take the time off they need and manage their own schedules. Unlimited PTO can even be a foundational aspect of a strong corporate culture.
When employees have unlimited sick time, they’re less likely to come to work when they’re feeling under the weather. That prevents illnesses from spreading throughout your entire office and disrupting your company’s productivity.
Unlimited PTO can give companies an edge when hiring, especially if they’re recruiting top talent in a competitive labor market. Unlimited PTO is seen by many prospective employees as a perk and it means that employees won’t turn down a job because of negotiations over time off.
Companies that offer a set number of vacation days each year typically have to pay employees for unused vacation days when they leave a job. With unlimited PTO, there are no accrued vacation days—so employers don’t have to pay employees extra when they leave.
On top of that, an unlimited PTO policy can end up saving your company money on administrative costs. There’s still paperwork around PTO, but administrators don’t have to keep track of accrued vacation and sick days.
Drawbacks of Unlimited PTO
While there are many benefits of unlimited PTO, it does have some drawbacks that employers and employees should be aware of.
Too little time off
While many managers worry about employees abusing unlimited PTO, the fact is that employees underusing their PTO is much more common. Some employees may not be clear on how many days they should take off each year while others may be afraid to ask for time off that they haven’t “earned” through accrual.
If employees don’t take enough time off, your company could see a rise in employee burnout. Another potential consequence is that employees who use less time off may feel as if they’re taking on extra work to fill in for employees who take more time off. This can increase tension between colleagues, which isn’t good for employee morale.
Too much time off
There’s also a risk that some employees might abuse an unlimited PTO policy and take more time off than they should. While there’s no “right” number of days to take off, employees could take off so much time that their productivity suffers. Managers have the power to deny time off requests, but this can cause tension between employees and managers.
Individual managers are responsible for approving time off requests for the employees they oversee. Different managers may have different approaches to how much time off is reasonable and when PTO should be allowed under an unlimited PTO policy. That can lead to tension within your office if some employees are allowed to take time off more freely than others.
Tips for Offering Unlimited PTO
An unlimited PTO policy can be beloved by managers and employees when it’s done right. But if executed poorly, an unlimited PTO policy can be a lightning rod for conflict within your organization. Here are some tips for how to introduce and manage an unlimited PTO policy.
- Ask employees what they want: Do your employees actually want an unlimited PTO policy? It’s important to ask and get employee buy-in before changing your company’s time off policy.
- Pay off accrued PTO. When switching from an accrued PTO system to an unlimited PTO system, you’ll generate a lot of goodwill with employees by paying them for the vacation days they had already accrued. Many employees save up vacation days with the understanding that they’ll be paid for them if they were to leave your company.
- Require a minimum number of days off. To combat employees taking too few days off and burning out, require employees to take a minimum number of days off each year. Requiring a minimum number of days off can also reduce tension between colleagues since everyone has to take at least some time off.
- Have a way to measure productivity. In an unlimited PTO system, time off is allowed as long as employees’ productivity isn’t suffering. So, it’s important to have ways to measure employees’ productivity and have managers step in if an employee takes too much time off work.
- Encourage employees to disconnect: When employees take PTO, they should be encouraged to disconnect completely from work. Employees who fully disconnect are more likely to return to work refreshed and be more productive.
Unlimited PTO is a policy that enables employees to take as much time off work as they need, provided it does not interfere with their productivity. An unlimited PTO policy can offer employees more flexibility and help companies recruit top talent, but managers need to make sure that employees take the time off that they need.
Companies should carefully consider how to implement an unlimited PTO policy and work to get buy-in from managers and employees.
Make Payroll Smooth and 100% Accurate
Learn how to reduce payroll errors and simplify your employees’ timesheets with Connecteam.