Unlimited PTO: Is It Right for Your Organization?

A 2014 Glassdoor survey estimated that in the previous 12 months, a U.S. employee with paid vacation time took only half of his or her allowed time off, and 15% had not taken any time off at all. Many companies are challenging the assumptions and traditions behind employee time off by implementing unlimited vacation policies. This trend has been most prevalent in technology and start-up companies, likely due to the high level of autonomy that comes with these positions. Companies that have introduced unlimited vacation policies, such as Twitter, The Virgin Group, CarMax, VMWare and Netflix, have noted tremendous success and an increase in employee happiness and retention. Experts roughly estimate that 1 out of every 100 companies currently experiment with unlimited PTO. Interested? Here’s what you need to know.

So what is an unlimited time off policy?

An innovative policy that allows employees to take time off as needed. The increasing importance of work-life balance has led employers to adopt a policy that communicates the value of their employees’ mental and emotional well-being. In theory, this causes employees to maximize their productivity when actually at work by allowing them to recharge their batteries at their leisure.

Pros

  • Reduces Administrative Overhead. An unlimited vacation policy reduces administrative overhead because the need to track, monitor, and pay out unused vacation time is eliminated.
  • Recruiting and Retention. An unlimited vacation policy is an excellent recruiting tool. It also promotes trust and loyalty throughout the company because it allows employees to use their judgment about when to work and how to schedule their responsibilities. Enhanced trust leads to enhanced productivity, a crucial component to the company’s success.
  • Work Life Balance. A happy employee is a loyal employee, and company morale improves when employees don’t have to worry about leaving early for a doctor’s appointment, or using up a vacation day by taking a Friday off when family comes into town. The pressure to plan far ahead and save days is eliminated.
  • Reduces Burnout. An unlimited vacation policy offers an incentive to work efficiently and it also reduces burnout. Employees will be more productive and efficient at work when they can take time away as needed.

Cons

  • Tracking and Limitations. To minimize potential abuse by employees, it is wise for employers to implement a few clear and detailed limitations such as requiring sufficient notice to supervisors or prohibiting long vacations during busy times. Further, the company will likely still have to apply an administrative tracking system, after all, to make sure employees are taking what they need and not more.
  • Potential Abuse. Employees may overuse and abuse an unlimited vacation policy and employers must consider ways to avoid this, such as detailed tracking methods.
  • Disparities.  Employees may argue that these policies are unfair if one manager grants more time off than another manager. Different managers think differently about how much vacation is appropriate, and this may be an unavoidable problem. Also, senior employees may become disgruntled when they are not rewarded with more vacation time for their years of service.

The long and short

Overall, the company culture must mesh with such a flexible vacation policy, and an unlimited time off policy may not be right for every company. However, unlimited PTO is a powerful tool for companies to recruit and retain happy, healthy employees— employees who ultimately produce excellent results instead of eyeballing the clock from 9-5. The effects of this new trend will vary company to company, but the policy is certainly gaining popularity.

 

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Photo Credit:  Phillip Harder