Certain business trends wax and wane, seemingly as often as the phases of the moon. And in 2015, unlimited PTO looked like it might be the newest fad. However, eight years later, a handful of wildly successful companies still embrace the idea of employees deciding time off in this way. Interestingly, most businesses currently implementing an unlimited PTO policy fall somewhere within the tech industry. For example, you might recognize names such as Microsoft, Twitter, Netflix, and HubSpot. But despite the apparent benefits to these behemoths of industry, most companies still reject unlimited PTO policies.
In 2022, only 9% of employees in America worked in positions and companies offering radical time off policies. But on the other end of the spectrum, 31% of U.S. workers didn’t have paid time off in any form. So, employees and business owners alike have reasonable cause to know more about this policy. After all, recognizing the pros and cons is the first step toward an informed decision. So, if you’re wondering whether unlimited PTO could help your business flourish, make sure you understand these potential advantages and pitfalls.
Pros of Unlimited PTO
1. Increased Employee Productivity
On average, high-performing employees take around 19 vacation days per year. Compared to low-performing workers, who take around 14, that constitutes a full work week more of time off. Of course, correlation doesn’t always amount to causation. But, a survey of nearly 125,000 employees demands some attention.
Pragmatically speaking, companies which allow their employees the time they need to rest and recuperate invest in their own success. Because when employees feel drained without the opportunity for a break, they make more mistakes. Opposite this, workers who take regular breaks often exhibit greater motivation and productivity in their jobs. A companywide policy of unlimited PTO offers employees the opportunity to rest when needed and return to work refreshed. And since there is a scientific link between productivity and taking time off, companies should take note.
2. Increased Opportunity for Recruitment
Naturally, when a person begins searching for a new position or career, they want to find something that benefits them most. So, companies hoping to recruit and retain the top talent available have to offer truly valuable perks. Unlimited PTO could be one way for employers to entice potential hires and build up a stronger workforce. So, when a company hopes to get a step up on their competition, offering more paid time off could help.
3. Unlimited PTO Can Reduce Costs
Interestingly, one of the chief fears about unlimited PTO is that companies will have to pay large amounts for no return on work. However, the opposite can also be the case. When workers have large amounts of time off pooled, and they have to use it or lose it, it can cost employers. For example, if someone has forty hours of unused vacation time about to roll over, but work is too pressing, they may still use it. In that case, the company will have to pay them for their time worked and the PTO on top. So, in effect, the employer pays double for the same work.
Furthermore, since unlimited PTO can help retain workers, companies could experience lower turnover rates. The average cost to hire an employee in 2023 is $4,129, and it takes about forty-two days. So, every time a worker leaves, it costs the employer to find someone to fill that spot. But if employees stick with a company for longer, the cost associated with hiring is mitigated.
Of course, as noted, employees who take more time off often become more motivated in their jobs. And as a result, their output quality is superior. So, if companies allow unlimited PTO, the work they do pay for is often better.
4. Positive Company Culture
Perhaps creating a positive company culture aligns more closely with the overall goal of unlimited PTO than just another benefit. However, it’s definitely worth talking about. Because creating an employee-centric atmosphere is essential for companies who want to build loyalty. And that loyalty extends to them not only from workers but also the general public.
Many businesses over the past few years have been heavily criticized for their treatment of employees. One of the most prominent examples is Amazon, which limited bathroom breaks to meet strict quotas.
Companies should strive to promote positive workplaces where employees feel safe and respected as possible. Of course, creating this sort of environment doesn’t require unlimited PTO as a policy. However, implemented this sort of paid time off lets employees know they’re valued and appreciated as people.
5. No Need to Juggle Time Off
Often enough, paid time off can become a puzzle of pieces to make fit together. Somehow, workers must juggle vacation, family obligations, mental health days, and sick days. And generally, those all draw from the same pool of time. Some events are fully known beforehand and others stand completely unexpected. Most people don’t plan to come down with the flu. But it happens nonetheless. So, when workers have a limited pool of PTO as a resource, knowing how to piece it together can create stress.
So, one benefit of unlimited PTO is that it eliminates this sort of cumbersome forethought. Workers don’t have to start the year trying to guess how often they’ll be sick or need to take of work for a kid’s baseball game. And as a result, they have better control over their work life balance.
Cons of Unlimited PTO Policies
1. Employees Might Feel Paralyzed
Interestingly, most workers with traditional PTO plans take around 15 days off each year. However, those with unlimited PTO take only around 13 days per year. So, the policy meant to allow for more time off often ends up with less vacation spent. One potential reason is that the employee then has the responsibility for determining how much they should work. And that being the case, it can become intimidating to take time off. Especially if superiors or higher-ups don’t take as much time for breaks.
For company’s with a bottom-line-focused gaze, this con might become more of a benefit. However, those with an employee-centric outlook recognize it as a negative outcome. Pushing the responsibility into the hands of the employee can sometimes make them feel less able to request time off. So, some companies which have unlimited PTO policies try to combat this by implementing a mandatory number of days vacation.
2. Employees May Abuse Unlimited PTO
On the opposite end of the spectrum, some employees may abuse the policy. After all, when unlimited vacation days with full pay dangles like a carrot, the temptation can become too great to bear. Obviously, the work return quickly tells a company whether their employees are abusing the policy. So, they can weed them out and install others who exhibit greater work ethic. However, once the damage is done, it can be costly to repair. Fortunately, this con is rare, as most employees with unlimited PTO instead take too few days.
3. PTO Cannot Be Used As a Reward
It might go without saying, but when unlimited PTO stands as a companywide policy, it no longer functions as a reward. Traditionally, employers might award additional paid time off to employees who performed well or showed loyalty. In fact, it could be used to reward any number of behaviors. Not so with companies mandating unlimited paid time off.
The upside is that in taking away one form of reward, employers have to become more creative in their appreciation. For example, you might pay for gym memberships, increase health care coverage, or pay for continuing education courses.
4. Scheduling Issues with Teams
With unlimited PTO, teams have to become more communicative and transparent about when they’ll be available. Because when workers have the opportunity to take off at any time, it can cause scheduling issues for meetings and important tasks. Even when team members communicate well, PTO can get in the way of meeting deadlines or even bottleneck projects entirely. So, adequate planning is essential for workers with this perk. Otherwise, the productivity unlimited PTO should spur can stagnate and become a hinderance.
5. Lack of Clear Expectations
Nodding back toward employee paralysis with time off, unlimited PTO sets no clear expectations. In fact, it takes what was once largely in the hands of an employer and shifts responsibility to workers. So, unless companies are very clear about how such a policy should function, it can become confusing and even overwhelming. However, setting too many expectations can actually defeat the purpose of the policy altogether. So, employers have to be extremely careful in their approach. Otherwise, they’ll fall somewhere on a spectrum from overbearing to uncaring.
The Verdict On Unlimited PTO
Ultimately, companies shouldn’t simply read a list of pros and cons about paid time off policies and make a decision immediately. These perks require testing and feedback. And moreover, leaders need to determine what sort of corporate culture they want to build and see how unlimited PTO fits or doesn’t. That said, there are good things about implementing such a policy for both companies and workers. However, if both sides aren’t careful, it could become costly when mistakes are made.
If you want to know more about the sorts of challenges company executives face every day, check out our courses on the leadership. Each one stands approved by one of several professional organizations for continuing education credit. So, business pros can learn more about these important subjects while knocking out their requirements.
Article written by Braden Norwood
Last updated March 20, 2023
