Unlimited PTO has emerged as one of the most popular new trends in the employee benefits space.
Between 2015 and 2019, US job postings for positions offering unlimited PTO increased by 178%. And that’s before the pandemic brought about a big rise in demand for flexible working arrangements, in which unlimited PTO is included.
But is unlimited PTO a good idea? Or simply a passing fad? We examine, from experience, three pros and three cons to help you decide for yourself.
Pro: Flexibility for Employees
The big selling point for unlimited PTO is the flexibility and freedom it grants employees.
They’re not constrained by a limit on how many days they can take away from the workplace. This frees them up to have a life outside of work, and spend time on other things that are important to them, such as family and personal hobbies.
This is valuable to employers as well, because it should, in theory, result in happier employees, reduced turnover, and increased pull in the hiring market.
Pro: Less Liability from Unused PTO
Unlimited PTO also takes away the issue of unused PTO, which constitutes a big financial liability for many businesses.
In most localities, PTO has to be paid out when an employee leaves their job. This needs to be accounted for at all times, and can amount to a lot of money, especially for long-serving employees.
Since there’s technically no unused PTO with unlimited PTO, there’s nothing to pay out, saving companies a small fortune.
Pro: Increased Productivity
Contrary to what many think, a lot of companies that offer unlimited PTO see higher productivity.
This comes from a pivot to performance-based measurement, instead of judging employees based on attendance.
Unlimited PTO only works if you set clear KPIs and performance benchmarks for employees. As long as these are met, they’re allowed to take as much time off as they want.
This is a powerful incentive for employees to get more done in a shorter time, and removes the false notion that simply being in the office for long hours equates to a productive day.
Con: Can Derail Productivity if Not Managed Correctly
Moving to cons, and the previous point can go the other way if you do not have those clear, performance-based KPIs in place.
Unlimited PTO can end up a free for all if you don’t manage it correctly. While abuse of unlimited PTO is far less common than you might expect, it is always a possibility.
There’s also the danger of short-staffing issues for workplaces that require a minimum number of people on hand at any time, such as service businesses, making unlimited PTO a bad fit in certain situations.
Con: Employees Can End Up Taking Less PTO
Rather than abuse, the more common issue that comes up with unlimited PTO is employees not taking enough time off.
A limit on PTO sets clear expectations. Take that limit away, and many are too scared to take a lot of time off, because they don’t want to be seen as taking advantage of the system.
This is bad news, as it raises the risk of employees burning out, and defeats the perceived benefit of increased flexibility and happiness among employees by offering unlimited PTO.
It’s one of the reasons that Buffer moved away from an unlimited PTO policy, pivoting to a “minimum vacation” policy instead, that pushed employees to take at least 15 days off per year.
Con: Legal Complexity
Unlimited PTO raises some tough questions in terms of how you comply with your relevant labor laws.
It’s not super clear whether unlimited PTO is satisfactory if you need to offer a minimum number of vacation days to employees, or if you have to offer paid leave for other leave types, such as sick leave or maternity leave.
Some places have laws related to paying out PTO, use it or lose it PTO policies, or accrued leave, which unlimited PTO doesn’t seem to fit in with.
You should have a legal team who looks at this, but it can all get very confusing, and might not be worth the hassle, depending on where your company is located.
Companies as large as Netflix and Twitter are among those who have, currently or at some point, offered unlimited PTO to their employees.
Are these companies ahead of the curve? Or is unlimited PTO unrealistic in practice?
It may work for some, but not for others. It depends on a variety of factors, such as the nature of your business, how you manage it, how much trust you’re able to place in your employees, and the legal requirements where your business is set up.
Done right, unlimited PTO can be a valuable tool to make employees happier and healthier. But there are negative consequences if it’s not managed correctly.
Review the pros and cons above, and decide for yourself whether your business should adopt an unlimited PTO policy.
Andrew Buck is a department head at Flamingo, a leave management startup for remote teams. He’s also been in charge of personnel and operations at several other remote tech startups.