The Pros and Cons of Unlimited PTO

The Great Resignation of 2021 forced employers of all sizes and industries to consider new ways to increase employee retention, from expanding benefits to stay interviews. Overwhelmingly, the nation’s workforce is asking for one thing: better work-life balance with work-from-home options and flexible work schedules.  

According to a recent survey conducted by the Harris Poll for Fortune, over 60% of Gex X, Millennials, and Gen Z employees cited unlimited time off as one of the most desired benefits when considering a new job–almost on par with remote work options. The idea of being able to take time off whenever desired is understandably attractive to employees; however, the long-term impact of this relatively new benefit should be carefully evaluated by employees and employers alike.

Below, we’ll dive into the pros and cons of unlimited paid time off (PTO) for both employers and employees.

Should Your Business Implement Unlimited PTO?

As we weigh the value of unlimited PTO, you may be asking yourself: Is this kind of employee benefit right for my organization?

The answer to that question will, of course, vary from industry to industry, but here are four questions to consider when weighing the move to an unlimited PTO plan.

• Is offering unlimited PTO something my employees are asking for?
• Is offering unlimited PTO becoming a standard in my industry?

• Could offering unlimited PTO help us recruit and retain new talent?

• What policies do I need to implement alongside unlimited PTO to ensure business will continue as normal?

Having a clear answer to these questions and going in with eyes wide open about the pros and cons of unlimited PTO will help you make the right decision for your business.  

Pros of Unlimited PTO for Employees

The benefit of unlimited time off for employees, while simplistic, cannot be understated. Unlimited time gives employees the time they need to manage the day-to-day of family life along with their own wellness needs.

Every employee’s needs are different, and an unlimited policy allows the employee to make the decision for themselves. The perceived flexibility is invaluable for a talented, motivated workforce.

Cons for Employees

On the surface, it is hard to imagine a downside to unlimited time off. However, there are some noticeable downsides perceived by some researchers and organizations. For instance, the most surprising side effect of an unlimited time off benefit is employees not taking advantage of it.  

Carta Chief People Officer Suzy Walther recently observed that individuals with unlimited time off plans typically take less time off than those with more rigid leave plans.

This could be due to a variety of reasons, but usually the answer boils down to three main causes:

• The employee does not feel secure asking for the time away. They fear that their manager or members of their team may hold it against them.
• The employee is not sure where the line is between acceptable vacation time and excessive time off.  
• The employee feels like their vacation will be interrupted by a manager or team member who needs their urgent attention.

In the end, no one benefits from refusing to take enough time off. It can lead to burnout, high turnover, and a less productive workforce.  

Pros for Employers

There are tangible benefits for employers that switch to an unlimited time-off model, but it is only successful if there are best practices followed at the outset of the offering.  

Benefits of unlimited PTO for employers include the following:

• Employees are less likely to come into the office sick and infect other employees if they do not have to worry about losing PTO days.
• Unlimited PTO hours saves managers and HR departments time spent tracking leave or bucketing leave time between sick leave, bereavement, vacation, and more.  

• Unlimited PTO can help you recruit top talent and retain your current employees in a competitive marketplace.  
• Employers do not have to pay out banked PTO time if an employee leaves the company, offering a significant accounting advantage.  

Cons of Unlimited PTO for Employers

When employers think of unlimited time off, it is easy to imagine empty office cubicles or stale project management cards that never move across team boards.  

The real downside of an unlimited time-off policy, however, is much more complicated and multifaceted.  

• Scheduling conflicts could create issues for teams that require a certain number of employees to complete tasks at a given time.  

• Depending on the industry you work in, unlimited PTO may not be possible for those who must be on call during business hours or those in customer-facing roles.  
• It is harder to use additional PTO opportunities to reward high-performing or loyal employees–a common strategic move in workforces across the country.
• Employees may not take the time off they need without the right encouragement or communication from their managers or HR department.  

Best Practices for Unlimited PTO  

Here are a few tips to consider when devising a strategic unlimited PTO benefit plan:

• Employees must be held accountable to the same performance standards–the same KPIs measured and analyzed when weighing promotions, pay adjustments, and other opportunities. If an employee's performance is suffering because they are taking too much time off, managers must step in and get them back on the right track.

• An unlimited PTO benefit works best when the company culture already operates on a goal-oriented basis that tracks performance and goals. Holding employees accountable to productivity standards will mean employees are less likely to abuse time off.  

• Some employers have found success in instituting a minimum time off (commonly about 15 days) to ensure employees use the benefit to relax and recharge.  
• Have managers lead by example when it comes to time off. Encourage them to turn off their phones and laptops and take a break from work.  

• Set scheduling boundaries for teams that need a minimum number of staff to complete their given tasks. Require manager approval but monitor to ensure a manager is just not approving team member time off.  

• Explain the interaction between protected leaves (FMLA, etc.) and unlimited PTO. The company policy should clarify the distinction between these overlapping paid benefits.

Is Unlimited PTO Right for Your Business?

Truly unlimited PTO with no oversight or coordination would be disastrous for any business. However, there are several benefits to having a well-rested and motivated workforce that an unlimited PTO policy can offer employers.  

Implementing unlimited time off can reduce the amount of employee attrition you have, recruit top talent, and have a more productive workforce.  

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