Pros and Cons of Unlimited PTO

Are you thinking about implementing an unlimited PTO policy in your business? It’s increasingly popular and can be a great tool to attract and retain talent, but these policies come with some pitfalls and may not be the right thing for every organization.

Pros

• Great option for a performance-based culture
• Can boost employee morale, productivity. and performance
• Promotes trust and flexibility
• Avoid the year-end scramble to “use it or lose it”
• Cost savings to the company by avoiding big payouts for unused vacation time at the end of the year or in cases of resignation or termination

Cons

• Several studies have shown that employees under unlimited PTO policies take less time off than those under traditional vacation time policies.
• Scheduling and workflow may be negatively impacted.
• Unclear expectations about how much time off is appropriate can lead to abuse and resentment.
• There may be unintended legal ramifications, particularly with hourly employees.
• Tracking for federally mandated leave like FMLA can be tricky.

Whether you decide PTO is right for you or not, here’s what we recommend:

• Consider strongly encouraging, or even mandating, a bare minimum to allow employees to unplug.
• Focus on results, not attendance, and measure employee performance based on achievements rather than hours worked.
• Set clear expectations about reasonable requests and circumstances in which leave may or may not be granted, regardless of whether leave is unlimited or structured.
• If you go with unlimited, continue to track time off. Use that data to find out if employees are taking the time off they should or if abuses may be occurring.
• Regularly evaluate the policy and determine if it’s still working for you. It’s ok to change your mind if it isn’t serving your company and your people as well as you’d expected.
• You may want to have one structure for exempt employees and another for non-exempt.
• Consider local and state laws and make sure your policy is written to comply with those laws. For example, you may have an unlimited vacation policy and a separate paid sick leave policy.

Unlimited PTO can be a very positive perk, but it doesn’t work for every type of business or organizational culture. Go in with your eyes open and listen to your people.