Unlimited PTO policies have been gaining momentum in recent years, rising by 178% from 2015 to 2019. However, even with traditional PTO, where employees accumulate paid time off, not enough of them are taking a break. Out of the standard 30 days that most leave policies offer, the average American worker claims only 10 days of vacation a year. Meanwhile, big companies such as Netflix and Kronos have been offering unlimited PTO to enhance work-life balance, which makes for happier workers. This perk does not seem to be such a bad idea if it means a company can retain top talent and minimize burnout and low productivity levels in the company.
On the other hand, its slow uptake in the workforce could be the skepticism behind how exactly employees can strike a balance between taking enough and deserved time off versus overstepping.
Given that unlimited PTO is unpaid, employees may not be willing to claim it since they’ll lose compensation and will be behind on their work. According to research by Namely, employees take just 13 days off annually under unlimited PTO, which is 2 days less than in a traditional PTO policy. As it is, whether an employee takes unlimited PTO or not affects the workplace culture and dynamics in employee and employer relationships.
It’s wise for a company to make an independent decision on implementing unlimited PTO as opposed to following trends. This can be done by weighing the pros and cons of unlimited PTO to determine if it’s worthwhile for the company’s growth.
Pros and Cons of Unlimited PTO
Pros
A successful unlimited PTO will enable the company to enjoy the following benefits:
Employees Will be Happier
Unlimited PTO allows employees to take days off as they see fit when they need to. Unlike limited PTO, they feel less pressure to stick to the company-allocated days and have enough time to attend to personal matters. Stepping away from the office will shed off any burnout accumulated, so they come back to work with more energy and motivation.
It Is Cost-Effective for the Company
The company can save extra dollars from not having to pay accrued time off when employees leave employment. Almost half of the states and the District of Columbia require companies to issue PTO payouts when employees leave or risk being fined.
It Fosters Good Faith Between Employers and Employees
When employees have the freedom to choose the number of vacation days to take, it imparts to them that they can be trusted. In most cases, no employer wants a loss of productive time in the company, but with unlimited PTO, an employer lets the employee take as much time as they want.
It Eliminates Administrative Workload
The HR is not required to keep track of the PTO taken. This creates more time for other critical tasks in the company.
It Gives a Company Leverage Over Talent Retention
It enables a company to stand out when looking for talent in the workforce. Since it’s a great perk, employees are likely to stay with the company as it reflects a positive culture of trust and consideration for workers’ well-being.
Cons
On the downside, unlimited PTO can cause disharmony in the company in several ways:
It Is Not Effectively Structured
Employees are more likely to take the assigned time off in limited PTO that they’re entitled to. However, they may be unwilling to have unlimited time off since there are no set rules on how many days off they should take. This means they will likely experience burnout and low morale due to fear of staying away from work for too long.
It Can Break Trust
Unlimited PTO can be seen as a tactic by companies to save money by not paying off employees when they leave. The lack of clear rules also makes employees unsure if their request for time off will be approved.
It Can Lead to Scheduling Challenges
Departments can face a hard time if many employees opt to take time off at the same time. This will need departments to set their schedules to avoid facing any downtime in the company. Employees also have to play their part in ensuring they don’t abuse the opportunity.
It Leads to Negative Internal Competition Among Employees
If a senior employee rarely takes days off, those in junior roles will avoid doing so too. Also, employees feel pressured to prove to HR they deserve days off based on their hard work. For it to work, leaders have to lead by example.
It Can Cause Disloyalty and Low Motivation
An unlimited PTO prevents employees from getting earned benefits since it’s unpaid. This risks the company losing great workers who need the motivation of being rewarded with more PTO in exchange for the long hours invested in the company.
Bottom Line
Unlimited PTO can be a powerful tool for a company to sell itself as a haven for happy and talented employees. However, behind the scenes, the leadership has to effectively ensure they achieve balance in the autonomy and productivity of their employees or lose it all. In addition, making adjustments to integrate unlimited PTO policies for a company already offering limited PTO can be an administrative stressor. For better chances of success, employers need to do their homework before jumping into the deep end.
ASAP Payroll will support you to better manage and oversee your unlimited PTO policy in your payroll and HR processes for better outcomes in your company’s performance. Feel free to contact us moving forward.
