Should Your Business Consider Unlimited PTO?

Summer is here, which means peak vacation season – surf’s up!  Increasingly, companies are offering unlimited PTO to their employees, but is it right for YOUR business?

The answer is dependent on your company strategy, culture, and the make-up of your workforce. Unlimited PTO is generally a better fit for knowledge-based workers (those who develop or use knowledge for a living, and include positions in marketing, programming, research, policy, compliance, writing, etc.) and project-focused employees.  It generally doesn’t work as well with hourly-paid employees, line positions within manufacturing, customer-facing and customer service-related roles.  If your staff is comprised primarily of the former, you may want to consider an unlimited PTO policy, but not before evaluating the pros and cons of implementing unlimited PTO.

Thanks to technology, the classic 9 to 5 work schedule has largely given way to employees working around the clock, with many working longer than a 40-hour week.  Unlimited PTO recognizes this trend, and rewards those extra hours with time for relaxation and rejuvenation, as an employee sees fit.

Unlimited PTO also demonstrates that you trust your employees to achieve their outcomes and results, while being able to appropriately and responsibly manage their time.  In fact, a high trust environment is an important cultural characteristic for success with an unlimited PTO policy.

Your employment brand can benefit from instituting an unlimited PTO policy; it’s an incredibly effective recruiting tool. Who wouldn’t want to work for a company that allows them greater control over their own life?  The notion of getting paid while being able to take a vacation or call out sick can easily become a deciding factor for someone who is choosing between offers from multiple companies.

From a monetary perspective, unlimited PTO can be a boon to your business.  Unlimited PTO means no vacation accruals – this results in no financial liability on the books or vacation time to pay out in the event of an employee resignation or termination.

Of course, there are downsides to consider.  The obvious and most common negative that immediately comes to mind for most employers is the potential for abuse by employees. In an unlimited PTO environment, managers must monitor (as they should anyway) each member of their staff to ensure they are meeting their goals.  Even if only one or two people take advantage of unlimited PTO, their work must be covered by someone, which could create stress and resentment within the office.

However, the opposite end of the spectrum — employees not using their PTO — can also become problematic.  Even if you do your best to encourage employees to use PTO, some will be hesitant.  Some employees may feel guilt for not having “earned” their time off (as with traditional PTO/vacation policies). They may feel judged for taking days off, and become worried that by doing so, they will put themselves at risk of not being promoted or being replaced. Ironically enough, one of the best ways to combat this fear is to make sure you and other higher-ups are taking their PTO as well!

Finally, upon leaving your company, employees may be unhappy that that they will not receive a vacation payout in that last paycheck, because there are not accruals with an unlimited PTO policy.

Unlimited PTO can be somewhat of a double-edged sword, so it’s crucial to consider your culture, workforce, and the pros and cons before deciding on whether to implement it.

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