We all know that when it comes to sourcing and recruiting top talent, it’s tough to compete in today’s job market. Not only are job seekers looking for fulfilling positions, but they are also looking for a company that has ideals that align to their own personal values. They’ll also likely look for long-term growth opportunities and employee benefits that are anything but standard.
Unlimited paid time off is one of these not-so-standard benefits that is becoming a popular perk that companies are using to get candidates. It’s true that more and more businesses are utilizing this incentive, but will unlimited PTO become as ubiquitous a benefit as healthcare coverage? Or perhaps the better question: should it?
What Is Unlimited Paid Time Off?
There are three kinds of paid time off plans: traditional, flexible, and unlimited. Unlimited PTO is a little more complicated than it sounds—it doesn’t only cover unlimited vacation, but also personal and sick days. In general, this kind of paid time off plan covers bereavement, sick days, vacation time, parental and family leave, short or long-term disability, and holiday pay.
You may think that this policy means that employees can take as much time as they want away from the office. But in reality, there should be limitations and parameters that come along with this employee benefit. There are some obvious pros to the plan, but pitfalls as well. And all considerations should be taken into account before adopting this kind of employee policy. Here, take a look at the pros and cons to better determine if it’s the right fit for your company.
6 Pros of Unlimited PTO
Implementing an unlimited PTO process has its benefits. Not only can it help attract candidates, but it can help keep them happy and more likely to stay put. Below are some of the more notable pros of the policy.
1. It can help attract job seekers who want flexible schedules.
One of the most common benefits of unlimited PTO for companies is that it helps with recruiting. Today’s workforce is looking for incentives that go beyond compensation. Job seekers will like the fact that they don’t have to negotiate for more days upfront. Plus, they won’t have to worry about accruing days as a new hire. This can help them focus on fostering a healthy work-life balance from the start of their time in a new position.
2. It can help improve or cultivate company culture.
A company that promotes a healthy work-life balance will support the opportunity for employees to be happier and healthier. This component of company culture can really demonstrate that your company values and trusts its workforce. And value and trust are core elements that help keep employees around, which brings us to our next pro…
3. It can help with employee retention.
Unlimited PTO can help with staff retention, particularly for millennials. Even if there are other elements of their employment that may not be ideal, an employee may overlook those downsides because of this great perk. For example, your company may not have the budget to support merit increases every year, but while an employee would surely appreciate more money, they may value their out-of-office time just as much. Not to mention that once an employee experiences a healthy work-life balance and unlimited PTO plan, they may be less likely to give it up and move to another company.
4. It can give time back to HR management.
HR teams face many challenges and any opportunity to free up some time for this department should be considered. Unlimited paid time off plans are typically managed by the team leader. They will determine if a request is approved after taking into account other team member absences and workload. This keeps any out-of-office time taken close to the team that it ultimately impacts and gives time back to the HR team member, as they will no longer have to manage the intake, approval, and schedule of departments’ time-off.
5. It means that companies don’t have to pay for unused time.
According to a study done by the U.S. Travel Association, more than half of Americans leave vacation time on the table each year, accumulating to 768 million days in 2018. At the end of the year or if an employee resigns or is terminated, a company typically has to pay for that unused time. Unlimited PTO plans can eliminate this potential cost.
6. It can boost employee performance.
Quality employees will want to be successful in their positions. Unlimited PTO can help encourage them to make the most of their time in the office so that they can enjoy their time out of the office. In theory, dedicated employees will be more productive while they are at work, so that their output does not suffer when they are on vacation or home sick.
6 Cons of Unlimited PTO
While there are pros to unlimited PTO, there are just as many cons. You’ll see that there are a few that are on “the other side of the coin” scenarios—what side you land on will ultimately come down to the kind of workforce you have.
1. It can open up opportunities for employees to take advantage.
No matter how well-intentioned the plan may be, it’s likely that some employees will take advantage. If the proper parameters are not put into place and a number of employees are repeatedly scheduling out-of-office time, their work will suffer, and their team will be negatively impacted. That is why it is important for team managers to have a process in place for approvals of any time off.
2. It can intimidate other employees to not take enough advantage.
Some employees may feel like they have to overcompensate to meet team objectives if others are taking advantage of unlimited vacation time. Typically, management sets the tone in these kinds of circumstances. So if a manager never takes personal days or sick days, their team may be intimidated to take time off for themselves. This is described as “vacation shaming.” A 2017 Alamo Rent A Car Family Vacation Survey that explored the vacation attitudes and behaviors of Americans found that nearly half of all workers feel a sense of shame or guilt at their workplace for taking time off to go on a vacation. This kind of thinking can impact company culture in a negative way and contribute to employee burn out.
3. It may cause performance issues.
Managers may approve too much or too little time for their teams. If team members are taking too much time, it may make it harder for everyone to achieve their goals. Consistently operating with less people can put unnecessary pressure on those making up for the lack of support. Whatever the particular circumstance may be, if unlimited PTO is abused, it can cause productivity and performance issues.
4. It can make collaboration difficult.
If people are consistently out, it can be hard to schedule meetings that are meant to be collaborative or involve multiple insights. That is also why it’s good to have a process in place that has guard rails around how time is taken.
5. It won’t count as a non-monetary benefit.
With tight budgets and formal review processes, it can be difficult to find non-monetary ways to reward employees throughout the year. Implementing an unlimited PTO policy for everyone will take away the opportunity to award any “extra” vacation time in lieu of a raise or bonus.
6. It can impact company compliance.
It’s important that a company understand how job-protected leave works in conjunction with unlimited PTO policies. Any leave that qualifies under the Family and Medical Leave Act (FMLA) needs to be tracked by HR, so that they can ensure that the protection of the employee’s job is honored for the duration of the qualifying leave.
What Unlimited PTO Actually Looks Like for Employers
Implementing an unlimited PTO policy requires a structure to support the unstructured nature of the plan. Switching from a traditional or flexible plan to an unlimited policy is a process in itself that needs to be handled with care. You’ll need to decide how to handle employees’ unused time before declaring the new policy.
Take time to think through the right parameters around time-off requests. How far in advance should employees ask off? How often within a time period can an employee ask off? How many team members can be out-of-office at the same time? These are just a few questions you may want to answer as you create the new policy. You may even want to consider using an online request system that will take all of the requirements into account when an employee makes a request.
You should also consider the temperament of your workforce and be sure that employees are goal-driven in order for the plan to work. Managers’ understanding of how the policy works is also imperative for the success of an unlimited paid time off policy. As the new plan is rolled out, HR team members should check in with managers and ensure they are comfortable with exercising their power, but also that they are not abusing it.
Outfitting your company with an unlimited paid time off policy may or may not be the right thing to do. Weigh the pros and cons before aligning to this kind of a plan, even if it means your competitors offer something to job seekers that you don’t. There may be other benefits that can set your brand apart that are more in line with your company’s needs. What’s important is that your company supports the ultimate success of its employees.