What is unlimited PTO and does it have a place in your workplace?

For employees, an unlimited vacation policy can seem like the ideal benefit. For managers, it can be the ultimate recruiting tool. A small but growing number of American companies are now offering workers the benefit of unlimited vacation days. Under these policies, employees are encouraged to take as much vacation time as they like — within reason.

Not surprisingly, unlimited paid time off (PTO) policies are getting a lot of attention. The idea of taking time off whenever – as long as all productivity goals are met, and the business still runs effectively – is extremely attractive.

The companies that usually offer unlimited PTO include start-ups, high-growth companies, companies with hard-to-hire workforces, those with innovative cultures, and those that have embraced flexible work schedules.

Even though companies such as Netflix, Best Buy, Evernote, and Oracle promote these policies as often as possible, they are still pretty rare. The Society for Human Resource Management’s (SHRM) research shows that less than one percent of employers offer unlimited PTO.

Why Are Companies Offering Unlimited PTO?

The rationale behind unlimited PTO is that employees will manage their own time because it is in their best interest to do so. While these organizations undoubtedly see unlimited time off as a key to recruiting – especially for hard-to-fill positions and in competitive markets – and as a way to build loyalty and engagement, there are some significant financial benefits, too.

Traditional PTO programs usually allow employees to roll over and bank unused time. This adds up to a significant accrued expense for the organization. So if an employee leaves the company, there is the potential to pay out a huge sum of money. Studies show that, for the most part, employees with unlimited PTO usually end up taking about the same amount of time off as employees who have an allotted amount of PTO.

Additional advantages of unlimited PTO include:

  • Reduces the chance that employees will come to work when sick and infect the workplace
  • Allows employees recharge for extended periods of time, which might not be possible with traditional PTO policies
  • Removes the need to spend time tracking the accrual of time off, freeing HR staff to focus on more strategic initiatives
  • Fosters a sense of trust in employees

Is Unlimited PTO Right for My Company?

Unlimited PTO can be hard to implement fairly. The most obvious issue is that everyone cannot be out at the same time.

In some cases, employees who have unlimited PTO benefits have to be encouraged to take more time off. They are nervous about taking “too much” time off, detracting from the goal of giving employees the time they need to take care of personal matters, go on vacation, or recover fully when sick. Also, some jobs simply require employees to be physically present, making unlimited PTO difficult to implement. It can also create tension if one group of workers are afforded the perk and others are not.

Additional disadvantages of unlimited PTO include:

  • If an employee abuses the unlimited PTO policy, it can be difficult to terminate him/her for missing too much work since they are technically allowed to take that time off
  • To effectively monitor the program, HR will need to track time off to minimize potential abuse and to prove compliance with various regulations, such as family and medical leave and disability coverage

The key to rolling out any new policy within your company is flexibility. It also pays to work with a reputable staffing firm like Snelling, so that if find yourself in a position where multiple people are out at the time, you have the coverage you need.

Thinking about rolling out an unlimited PTO policy? Contact Snelling keep your business humming.