What Is Unlimited PTO? Pros And Cons Of This Benefit For Your Business

If you’re looking to update your time-off policy to make sure it’s competitive, you may be wondering if you should consider unlimited PTO. Unlimited paid time off is not yet mainstream, with only 4% of companies offering this benefit, but in today’s tight labor market, it may be a good option to think about – especially because 50% of US workers say they’d prefer unlimited PTO over a higher salary. Still not sure? Let’s evaluate whether this is a worthwhile perk to offer at your company.

Here, we’ll explain what unlimited PTO is, how it works, and the pros and cons of this approach to time off for both you and your employees. After reading this, you’ll be prepared to decide if adopting this approach is best for your company and, if it is, steps for implementing a successful policy in the workplace.

What is unlimited PTO?

Unlimited paid time off (PTO) is a structure in which employees are not assigned a set number of paid days off at the start of the year nor do they have to accrue PTO before taking time off. Rather, they can take as many days as they want as long as they’re meeting their goals, it doesn’t disrupt the business, and the leave is approved.

Keep in mind that you can structure your policy how you’d like so you could decide to have a waiting period before employees can start to use unlimited PTO.

How does unlimited PTO work?

With unlimited PTO, there’s no cap on the amount of time the employee can take in a given year. That doesn’t mean, however, that you can’t regulate how employees use the time off. We’ll get into the rules you may want to implement regarding unlimited PTO shortly such as how much lead time you require before an employee takes leave so you can prepare in advance.

What are the pros and cons of unlimited PTO?

As unlimited PTO starts to gain more traction, you’ll want to consider the pros and cons to decide if this approach is right for your business. We’ll cover some of those here.

Pros:

Increased employee productivity. When employees have the ability to take time off when they want, for whatever reason, it can decrease their stress levels, which can make them more productive when they’re in the office.
A healthier workplace. Since workers won’t feel pressured to come into work when they’re sick because they have unlimited PTO, they may stay home if they’re contagious, reducing the risk of spreading an illness throughout your worksite.
Better communication between employees. With unlimited PTO, your employees will need to be in close contact with their co-workers to ensure adequate coverage of responsibilities so that work is completed on time. This can help give employees visibility into what others are working on.
Less administrative hassle. With unlimited PTO, you’ll still need to respond to requests and manage leaves for proper staffing levels, but it can free you up from having to track employee time off.
It promotes trust. By having an unlimited PTO policy, you’re essentially telling your workers that you trust them to get their work done and manage their time – both in the office and out. And that can help improve morale and satisfaction.
You may save money. Since you don’t have to pay out vacation time at the end of the year or when an employee leaves, you may realize savings in the long run as long as employees don’t abuse your policy.
It’s a good recruitment tool. As we mentioned at the start, half of workers surveyed said they’d like unlimited PTO over a higher salary so offering this perk can set your company apart when you’re trying to fill positions.

Cons:

Some employees may take less time off. It’s important for a healthy work-life balance and to avoid burnout that employees actually use time off. However, since there’s no set number of days they have available, they may feel uncomfortable taking time off or feel that they can’t justify the PTO.
The potential for abuse. The opposite of the point we just made may also happen, meaning, employees may take excessive time off. Not only may that mean you could end up paying an employee who is out for months, it can also leave your company understaffed and other team members overloaded.
Employee dissatisfaction with the change. Some employees bank on getting paid for their unused vacation when they leave your company and may not be happy if they can’t roll them over each year and accumulate the days for financial value.
Scheduling challenges. Since employees have the option, they may take more time off, which could lead to more employees being out at the same time if notice and approval requirements aren’t always enforced.

How do we create a successful unlimited PTO policy?

Even if PTO is unlimited, you’ll still want to have rules governing the time off. For example, considering addressing these issues.

Explain who qualifies: You can offer different policies to different employees such as based on tenure. However, if you don’t offer it across the board, be aware that it could cause some problems in the workplace around fairness so you’ll want to consider this approach carefully.
Decide if you’ll have a waiting period before employees are eligible to request PTO.
Be sure you let employees know that they’ll still be held to their performance and productivity expectations.
Provide clear guidelines on how to request time off and make sure you specify that you have the right to reject a request due to staffing issues or workloads.
Explain the interaction between PTO and other types of leave that may be available to them, including coordination of overlapping paid benefits.

How to Decide if PTO is Right for Your Company

While unlimited PTO can be a good benefit for you and your employees, you’ll want to consider this approach carefully before implementing a policy at your company. As you weigh this option, it may help to consider various other types of leave you could provide as a perk. Read our next article on the different types of employee leave to help you decide on the best approach for you.