What You Should Know About Unlimited PTO

Unlimited paid time off sounds a bit like something that belongs in some kind of office fantasy novel, right? Being able to take time off—and get paid for it—as many days of the year you need can’t actually be a real thing companies are using… right? 

Wrong. 

Unlimited PTO is a very real policy companies out there actually offer. Among large tech, finance, and media companies, 20% of them offer unlimited PTO as one of their employee benefits. That number might keep on growing as unlimited PTO is popular with workers: 78% of employees surveyed by MetLife indicated that they want unlimited PTO. With that level of interest, this new form of time off has high potential to be a powerful tool for attracting talent.

Unlimited PT is definitely something worth considering with your company’s employee benefits, but how can you know if it’s right for your organization? Let’s dive right into everything you need to know about unlimited PTO, so you can see the full story of this vacation benefit. 

What Is Unlimited PTO? 

To start, what does unlimited PTO mean? Unlimited PTO is a company policy that lets employees take as much paid time off as they want so long as they get their work done. The idea is that employee performance is measured by results, not hours logged, so they are not held to working a specific number of days in a year. This policy gives employees more control over their schedules than the traditional 9-5. If they get their work done, they can take a vacation.

But that doesn’t mean unlimited PTO is a free-for-all chaos where employees are dipping in and out of work randomly whenever they want. No, with unlimited PTO, most employers still have employees let them know when they’re going to use their time off, often through formal requests that have to be approved by a manager. Managers would ideally approve any and all requests if the employee had all their work on track. 

How Does Unlimited PTO Work? 

So how does unlimited PTO work? Unlimited paid time off starts with the concept of having no accrual of time off and no standard number of days off. The employee is free to take a day off to spend how they wish without having to do mental gymnastics trying to fit everything they need into 10 personal days. 

On the employer side, it’s probably a good idea to have some kind of system in place for employees to officially request their days off so managers know when their staffers are out of the office and don’t accidently have a day where the entire team isn’t working. Often, requests are prioritized on a first-come-first-serve basis to meet coverage needs. The employee will submit a request (with enough time in advance and to the right people as outlined in your vacation policy), the manager will approve it if coverage needs are met and their work is taken care of, and the employee can then take that day off. 

The secret sauce of unlimited PTO is that this process can then repeat as many times as the employee needs. Pretty sweet, right? 

Why Offer Unlimited PTO? 

Okay, so unlimited PTO sounds great for employees. But what’s in it for the employer? Why are so many companies offering this benefit? (Especially all the snazzy and up-and-coming-next-big-thing tech companies.) Let’s take a look at all the pros of offering unlimited PTO as an employee benefit, as well as what might hold you back from offering it (and what HR could do to mitigate those hurdles).

Pros of Unlimited PTO for Employers

• Saves money by not having to pay for PTO. When your employees with excess PTO quit, that costs your company money. In some states, you’re required to pay them for those days—even if they haven’t used them—when they leave the company. Unlimited PTO doesn’t have that problem. If an employee quits, they quit and there are no PTO days to cash out.
• Helps with recruiting. Unlimited PTO can help attract great candidates to your company. Unlimited PTO helps show that your company is focusing on helping employees balance their work and lives and can be a great benefit to offer to help with recruitment. Plus, with 1 in 10 large employers offering unlimited PTO, it’s becoming a way to stay competitive in the hiring market. It’s tough out there trying to recruit the best talent, but great benefits like unlimited PTO help you stay on top of it. 
• Builds trust. Having an unlimited PTO policy builds trust between employees and employers. After all, employers are trusting employees not to take advantage of the policy, and employees are trusting their employers to allow them vacation days when they need them. And building trust matters. Employees in high-trust work environments are 76% more engaged than those in low-trust environments. 
• More communication.To get an unlimited PTO policy in place and working, you have to communicate with your employees. That itself is a win. As employees and employers communicate back and forth about time off, you’re boosting employee relations. With a great system in place, everybody has an easy route to communicate with each other, and communication is a great workplace win. 
• Increased productivity and retention.It might seem backwards, but allowing employees more freedom to take time off work actually boosts productivity. Vacations boost employee wellbeing too. In a recent survey, 85% of employees said they’d stick around at their job if they could see their employer cared about their well-being. So incorporating unlimited PTO helps you take productivity up a notch while also helping with retention. 

Cons of Unlimited PTO for Employers

Even with all the benefits of unlimited PTO, it’s not a perfect policy. Here are a few of the struggles some companies face with with unlimited PTO and some ways to handle them:

• No structure leads to employees not taking time off. Without a certain allotment of PTO days, some employees don’t take much time off. People can struggle to take action in ambiguous situations for fear of how it might look or affect their coworkers. The easy fix here is to actively encourage employees to take time off. You can do this by incentivizing time off, modeling vacation day usage (have your leaders take time off and use their unlimited PTO), and regularly reminding employees to take time off. Create a culture that doesn’t promote overworking, and you can get the most out of unlimited PTO. 
• Fear of use. Unlimited PTO is kind of new and with that comes some growing pains. People just don’t know how it works or how to use it. They might be afraid to try it out because they’ve never had something like it. They might worry about how taking time off will appear or that they can’t do it without making their team suffer. However it manifests, fear of use is again fixable by creating a culture that encourages time off and taking a break from work. If employees are encouraged to take time off and fully understand the system to do so, they might be less afraid to use their unlimited PTO. 
• Creates tension between employees. “Janet is taking another vacation? Good for her!” Unfortunately, not every employee is going to react like that when an employee uses their unlimited PTO. Unlimited PTO does have the potential to breed resentment and contention but, ultimately, unlimited PTO isn’t the culprit for this tension. No, unlimited PTO is just what brought a problem in company culture to the surface. The problem when time off breeds tension is really that there’s a culture at the workplace that looks down on employees taking a break from work. So creating an environment where employees feel comfortable taking time off should nip this problem in the bud. 
• PTO policy abuse. This might be the big worry for a lot of companies. They ask, “But what if someone takes too much time off?” Here’s the thing: If you create a rock solid vacation policy and have a formal system for submitting time off requests, you’re protecting yourself against this worry. Time off still requires approval, and if someone is abusing the system and not getting their work done, a manager can block a request if necessary. Luckily, this is relatively rare. 

Other Types of PTO

Discretionary PTO

This type of PTO is similar to unlimited PTO, but it’s designed specifically to increase collaboration between a team member and their manager. With discretionary PTO, employees can take time off (this works with both a set number of vacation days and with unlimited days), but to get it approved, they have to work with their manager to set it up and collaborate about how it’ll work. For example, if a team member wants to take a week off in July, a few months before, they’ll sit down with their manager and talk about it. They’ll come up with a plan for the employee to finish their projects before heading off on vacation. This type of PTO can help team members build relationships with their supervisors. 

Floating Holidays 

A floating holiday is a day of paid leave where the employee gets to choose when to use it. This can be done a couple of different ways. One way is to give everyone a set number of floating holidays and let them use them however they want. That way employees can use them to add a day to their vacation, skip coming into work the day after the Fourth of July, or even take their birthday off. It’s particularly powerful because employees can also choose to celebrate holidays that aren’t a nationally recognized holiday. That empowers employees of different religions to celebrate the holidays that are most important to them, and it helps you create an inclusive environment. Another way to use floating holidays is to provide a list of approved holidays that team members can use their floating holidays for. It’s a good idea to include any religious and cultural holiday on that list. 

Flexible Time Off

With a flexible time off policy, employees receive an allotted number of days off per year, which they can use for any reason. A company may offer 20 days, for example, which employees can use equally for vacation, sick time, or religious holidays.When used by companies where employees have to work over non-traditional schedules — including working on holidays — this style of time off is usually a higher-than-average number of days. To make up for potentially having to work Thanksgiving or Christmas, the team members get to take a few more days off a year and do so at different times than other people. 

Paid Holidays

Some companies choose to close their offices for national holidays and not require their team members to work that day. The employees still get pay for the day without losing a PTO day. For example, with this type of PTO, someone wouldn’t need to work on Labor Day, but they wouldn’t lose any pay, and they wouldn’t lose a vacation day. They simply get a paid holiday to enjoy the day! Companies that offer paid holidays often include: Christmas, Christmas Eve, Thanksgiving, Memorial Day, Labor Day, July 4, New Year’s Day, MLK Day, President’s Day, and Juneteenth.

Sick Days

Sick days are paid days off not used for vacation but to let an employee stay home when they’re sick or injured—or even caring for someone (like a child) who’s sick or injured. Most businesses give their teammates an allotted number of sick days, but it’s not required in the US. With sick days, employees get to stay home and recover without losing any pay. Sick days are different from other types of time off. Even if your organization offers sick leave, it can be helpful to also offer bereavement days, personal days, jury duty, military leave, and other different but necessary days off. 

How to Transition to Unlimited PTO

If unlimited PTO sounds like a good fit for your company, there are a few steps you can take to start implementing it.

• Pay current employees for unused PTO. If they haven’t used any days, compensate them and get them excited for the new policy. 
• Track new PTO separately to go with the unlimited PTO policy. Get a new system for keeping track of PTO ready. What might have worked when your employees had 10 days might not work with unlimited PTO. 
• Give employees a heads up on the new policy and allow them to use their saved up time. Communicate how the policy will work, so everyone understands. It can also be nice to give employees a chance to use any days they’ve saved. They probably planned carefully to stockpile their vacation days, so it can be respectful of their efforts to let them use those days before transitioning. 

Supporting Employees In and Out of the Office

Ultimately, unlimited PTO can support employee mental health while helping your talent recruitment and retention efforts in this tight hiring market. With 83% of employees believing their wellbeing is just as important as their salary, workplaces are working hard to create a place where people want to work. 

We’re here to help you keep that momentum going with a top-tier wellbeing program. Talk to a wellbeing specialist to get started!