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The Pros and Cons of Implementing an Unlimited PTO Policy

Paid vacation days are one of the most sought-after job perks around. The more paid time off a company offers, the more attractive they are to job seekers. So, an unlimited personal time off  (PTO) policy is often considered the crème de la crème of employee benefits.

Why? Because an unlimited PTO policy offers employees as much paid time off as they need.

U.S. employees are granted an average of 10 days of paid vacation a year—one of the lowest in the world. In contrast, most European countries are legally required to give at least 20 days of PTO a year. UK employees are legally entitled to 28 days of paid holiday.

So, it’s unsurprising that U.S. employees are particularly eager for unlimited PTO. But does it really work? What are the benefits and implications? Can you really run a productive business with an unlimited PTO policy?

Let’s find out.

What is an unlimited PTO policy?

An unlimited PTO policy allows employees to take as many paid vacation days as they need. Unlike the caps imposed by traditional PTO, unlimited PTO has no limit to the amount of vacation days that employees can use.

Does this mean that employees will take loads more time off? Surprisingly, no it doesn’t. 46% of workers who are entitled to PTO don’t use all of it according to the Pew Research Centre. Over half say that they simply don’t see the need.

Also, unlimited PTO policies still have rules and restrictions.

Employees still need to request vacation days via their manager. Managers may still decline requests if the absence will hinder business operations. So, for example, if they can’t find enough coverage or there are important meetings coming up. Plus, whether or not the employee is caught up with their work will be taken into account.

Benefits of unlimited paid time off

Still doubtful? Let’s explore the benefits of unlimited PTO.

Freedom in time management

Unlimited PTO is another way to create a flexible work environment. It’s why you so often see it being offered by startups, tech companies, and other businesses that embrace the benefits of remote working.

Unlimited vacation days give employees the autonomy they crave. It encourages them to manage their time more effectively to take better advantage of their vacation days.

Reduced stress and burnout

Speaking of flexibility, employees are 43% more likely to experience burnout if their job doesn’t support flexible needs. Currently, 42% of the global workforce report feelings of burnout.

With an unlimited PTO policy in place, employees can take personal leave as and when they need it. This can directly alleviate and prevent feelings of existing stress. When employees take regular vacation days, they’re likely to return to work rejuvenated and focused.

Enhanced employee well-being

Unlimited PTO supports an essential pillar of employee well-being —a healthy work/life balance.

Effectively balancing work and personal life reduces burnout and improves well-being. So, it’s crucial that your employees are able to pursue out-of-work leisure activities and spend time with friends and family. Equally, work that is productive and engaging instills a sense of purpose that’s foundational to well-being. 

Unlimited PTO lets employees choose their vacation days, giving them more control over their work/life balance. It prevents both languishing and burnout, empowering employees to flourish in their professional and personal lives.

Increased motivation and productivity

Employees will be more motivated to engage with their work if they know that it will result in extra time off. So, offering unlimited PTO can act as an incentive for productivity. And, of course, employees who take time off tend to be more energetic and enthusiastic when they return to work.

For HR teams, these productivity benefits are amplified. Along with being able to take time off as an employee, they also don’t have to track other employees’ unused and accrued vacation days.

Tracking used, unused, and accrued vacation days is a significant administrative task that involves stringent HR documentation and policy adherence. It grows even more complicated if you hire remote workers from around the globe. Different countries have different legal PTO requirements.

An unlimited PTO policy streamlines HR processes by eliminating administrative and legal complications. Global payroll software can also be used to reduce manual data entry, further optimizing HR productivity.

For example, imagine you’re a U.S. employer hiring remote UK employees. Payroll software stores the number of vacation days taken by an employee—along with their other payroll data—and uses it to automatically generate accurate online payslips. Global payroll software will also calculate payslips in alignment with local tax regulations.

Drawbacks of unlimited PTO

The benefits may have swayed you in favor of unlimited PTO, but the drawbacks might just turn you against it. 

Unclear usage guidelines

It’s up to your employees how many days they take off. But exactly how much is appropriate? 

Do they take lots of extra days off just because they can? Or do they take fewer days off so as not to appear as though they’re abusing the system—even if it negatively affects their well-being?

With no hard-and-fast rules for how many days can be taken off, the lack of clarity can cause confusion and anxiety for employees. Confused, anxious employees who avoid taking time off are going to have poor well-being, which is exactly the opposite of what you’re trying to achieve. 

Risk of misuse and overuse

It’s rare—but it happens. Unlimited PTO policy abuse can severely disrupt business productivity. So, watch out for employees who appear to be abusing the system. 

That said, abusing unlimited PTO is pretty hard to do. PTO requests still need to be approved by management. So, as long as requests are handled fairly, you should completely avoid this issue.

Challenges in workload planning

Unlimited PTO doesn’t just increase employees’ control over their individual workload. It makes them more responsible for the productivity of the entire team. 

If an employee takes days off when they’re not caught up with work, it can set the whole team back. Team managers will have to quickly re-allocate workloads, ruining weeks of careful planning and overburdening working employees.

Issues with distribution and coverage

You need enough working employees to meet project deadlines and complete daily tasks without the risk of burnout. But with an unlimited PTO policy, employees can, in theory, request time off on days that will leave teams understaffed. 

If multiple employees want to book off the first week of August, for example, you’re going to encounter serious coverage issues. But how do you fairly distribute PTO to avoid accusations of favoritism or discrimination?

To mitigate these challenges, many businesses turn to HR management software because it streamlines the vacation request and approval process. 

Employees have access to a shared calendar, where they can view team availability in advance and request time off. HR can also accept or decline time off requests in alignment with workload and coverage needs, which can be immediately communicated to employees. 

Plus, HR can use customizable reports to optimize PTO policies. This facilitates fair distribution and reliable coverage across teams.

Evaluating suitability for the company

Before adopting an unlimited PTO policy, ask yourself whether it fits with your current company culture.

If you have a competitive workplace culture, an unlimited PTO policy may cause more harm than good. In some companies, taking time off is seen as lazy and self-centered by colleagues and managers alike. So, employees may avoid taking time off in fear of ridicule and contempt.

Remember we mentioned that 46% of employees don’t use all of the vacation days that they’re entitled to? Well, the same research showed that 43% of employees say it’s because they feel bad about coworkers taking on additional work. 19% are worried that it will affect their career advancement, and 16% are concerned that they might lose their job.

In this kind of company culture, introducing an unlimited PTO policy risks provoking employee conflicts and inciting accusations of favoritism. 

If this sounds at all similar to your company, work on improving your company culture. Aim to align employees and management with a well-being-first culture that recognizes the benefits of taking vacation days. Implementing mandatory vacation days is a good place to start!l 

Should you offer unlimited PTO?

It’s clear to see why employees want unlimited PTO. It improves their flexibility, autonomy, and work/life balance, all of which are essential to positive well-being. And, of course, the happier your employees are, the more productive and motivated they’ll be. So, you benefit from a business standpoint, too.

Also, from a business perspective, an unlimited PTO policy makes your company instantly more attractive to job seekers. It can secure you high-quality talent, especially if you’re hiring overseas employees who are used to having 20+ days of PTO. 

But there are still significant drawbacks to unlimited PTO that might make it an unsuitable solution. You need to carefully evaluate your company’s culture and operational structure to determine whether unlimited PTO is viable.

Regardless of the PTO policy you put in place, make sure that it’s transparent, fair, and focused on your employee’s well-being.

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