Pros and Cons of Unlimited PTO

Unlimited PTO

Pros and Cons of Unlimited PTO

Unlimited PTO (paid time off) has become a buzzworthy term in the workplace over the last few years.  If you haven’t personally experienced or offered unlimited PTO as a benefit you may have a hard time wrapping your head around the concept and how it could possibly be real or effective.  Well, you’re not alone and it is still far from the norm. Nearly ¼ of U.S. companies do not offer any sort of paid time off as a benefit and on average, U.S. workers receive 10 days of paid vacation time.  So how did we jump to unlimited PTO being an option all of the sudden?

In 2015 big companies like Netflix, LinkedIn, and Hubspot made it known that they were implementing unlimited PTO policies for their employees.  As a result, more companies began to follow suit in order to stay competitive when attracting and retaining top talent.  Today, we are even seeing the startup community heavily adopt these same policies, especially in the tech industry.

If you’re thinking about jumping on the bandwagon, there are a few factors to consider before introducing such a policy.  A surprisingly common concern that has surfaced, now that the early adopters have tested the waters is, “What kind of culture does an unlimited PTO policy create?”.  You may find that an unlimited PTO policy does more harm than good for the overall well being of your company. Our pros and cons list will help you determine if such a policy is a good fit for your company.

Pros:

  • Promotes a work-life balance for employees – A hearty time off policy allows employees adequate time to rest, relax, and rejuvenate which can improve the overall emotional and mental wellbeing of the company.
  • Increases productivityEmployee burnout is a constant concern and can lead to unpleasant, high-stress environments.  Employees that embrace time off, often times have a more positive perspective on their work environment and have the ability to inspire a happier workplace overall.
  • Saves the company money – With an unlimited PTO policy, employers are not obligated to pay out unused time off.  Since time off is not “accrued” there is technically nothing owed to the employee if they leave the company.
  • Boosts recruiting and retention – In the end, it is a tactic to stay competitive when working to attract and retain top talent.  Prospective employees tend to evaluate the full benefits package in addition to the salary offer when choosing an employer.

Cons:

  • Overlapping vacations – If the proper procedures for requesting time off and receiving manager approval aren’t in place you could find yourself left shorthanded and inadvertently hindering productivity instead of increasing it.
  • Cultivating a culture of judgment and fear – This was an unexpected yet major factor that has come into play with unlimited PTO policies.  Managers, leaders, and coworkers may begin to judge one another based on who is taking time off and who isn’t. It can create a sense of fear for employees to take time off if their managers or coworkers are not.  Employees may fear that it will be used as a reflection of their job performance and end up not taking any time off at all.
  • Abuse of the policy – A common concern of unlimited PTO policies is that employees will abuse the benefit.  If expectations regarding the policy aren’t clearly established and communicated you run the risk of doing more harm than good for your company and the employees left to pick up the weight.
  • Difficult to implement – Making the switch from a previous policy requires thorough planning.  You have to take into consideration payout for time off accrued up to that point, whether the new policy can be applied companywide or limited to certain departments, and the time investment necessary to establish expectations and procedures.

Unlimited paid time off policies are by no means a one size fits all solution.  It may be worth it to test such a policy with select departments before launching company-wide.  You may even find that your employees prefer the structure of a more traditional policy. A great place to start evaluating the effectiveness of your current policy is to run a report detailing how much time off your employees are currently receiving and utilizing.  You can even take it a step further by pairing that information with employee interviews or surveys regarding their happiness and overall satisfaction with their current environment.

If you are interested in learning more about how Payroll Link Workforce Ready reports can help you gain valuable insight into your current processes, give us a call or schedule a demo.  If you are a current client of Payroll Link, contact your customer support specialist to be sure you’re getting the most out of your reporting options.