Unlimited paid time off (PTO) sounds like a fantasy, but the fact remains that you still need to over deliver in your day job. Not many of us manage to do that in our 9-to-5 hours, so is unlimited PTO just an HR marketing trick to coax you in the door?
In this blog, we look at the advantages and disadvantages of this policy. Should you believe the hype? What does it mean for your holiday choices? How will it work in practice? As start-up culture starts to influence big corporates, is this policy workable in a business machine with hundreds of moving parts? We consider:
- What does unlimited PTO mean?
- Five advantages of unlimited paid time off
- Four disadvantages of the unlimited PTO
- Different types of unlimited time off
What does unlimited PTO mean?
Unlimited paid time off is an increasingly popular employee benefit where employers allow their people to take as much time off as they need. This can include vacation days, time off for life events or illness cover. Their productivity is prioritized, rather than the time that they spend in the office. Trust plays a key role in ensuring that this policy is used responsibly.
In practice, the phrase unlimited is not strictly true. People still need to dedicate enough of their time to their work and their bosses will ensure that they are more than busy enough to deliver on the company goals. Advanced notice of absence is often required and there is only so much flexibility to fit in with the schedules of team members and colleagues. Different companies will allow differing levels of autonomy.
5 Advantages of unlimited PTO
While there may be an illusion of freedom, the unlimited PTO policy does bring benefits for the majority. There is nothing worse than seeing your holiday allocation tick downwards, especially when a life-changing event looms on the horizon. In fact, there are many solid business reasons for it, showing that it can bring benefits for the company bottom line.
1. Work/life blend
When you can take unlimited PTO, you will feel more in control of your work/life blend. Dealing with personal matters and recharging your batteries no longer needs to take place alongside the day job. So long as you can hit your targets when you get back, that away time is so much more meaningful. We all know the stress of vacation days ticking down as the year goes on.
2. Increased productivity
It follows that if you have had a good break, your time at work will be that more focused. You will give more to those around you and in return they will likely give more to you. Your time becomes a more valuable commodity when your next reset is just around the corner. Reducing low productivity could be one of the big outcomes in this push to give employees more flexibility around how they manage their working patterns.
3. Flexibility
Enjoying flexibility to react to unexpected changes in your life can reduce long-term stress and allow people to be more present at work. If you know that you can take a week off to care for a sick relative, you won’t worry about the impact so much. Many people have other commitments outside of a normal working schedule – such as education. Demands on your time are rarely constant. Sometimes you have more time to work and sometimes you really don’t.
4. Talent management
Attracting and retaining talent will be vastly enhanced if you put the wellbeing of your employees first. An unlimited PTO system that is encouraged creates all sorts of benefits for talented employees. Why wouldn’t you want to hire someone who can do a fantastic job in less time than someone else.
5. Improved morale
When there is a sense that your employer and boss trust you to manage your workload, the resultant mutual respect can improve morale across the company. Those who use their PTO responsibly will always think about the impact on those around them, creating a bond that will carry them through many difficult times.
4 Disadvantages of unlimited PTO
Unlimited paid time off can, however, be an issue if it is not properly managed. If the policy is abused by too many people, chaos can ensue.
1. Lack of structure
Ambiguity and uncertainty are not helpful in the workplace. When you are never quite sure when others may take time off, it can derail confidence in projects and sow mistrust in colleagues. Someone might have a right to unlimited time off, but if there is a perception that they are working less hard, resentment can build up fast. This may lead to some people actually taking less time off than a standard holiday allocation.
2. Taking advantage
Some people will always push the limits of the rules. Even a small amount of excessive time off can disturb the equilibrium. Uneven contributions amongst team members can cause resentment, especially when the low performers are the ones taking all the time off.
3. Unequal distribution
Some jobs are simply more suited to unlimited paid time off. Employees in high-pressure or business critical roles may feel like that are not able to take as much time off as they would wish, while those in more mundane roles would have more freedom to do so. This could cause inequalities and bad feeling to rise between colleagues.
4. Operational challenges
Unlimited paid time off can cause huge ruptures in business continuity. If teams are big enough, they can weather the disruption, but for smaller start-ups (where this policy is common) it can lead to decreases in service continuity and output.
Different types of time off arrangements
Different employers will likely have a mix of the below arrangements for holidays and time off. While there might be a strict policy at one company, others may allow you a certain degree of flexibility in your time off arrangements. Don’t be scared to ask about it, though. You will never know whether it is up for debate unless you ask.
- Discretionary paid time off (PTO) is where employees can take time off within certain limits. Employees can manage their time as they see fit, although this time off is not always paid. As long as this does not interfere with their work commitments, this is a common alternative that many bosses would encourage in any case.
- Floating holidays allow an employee to work on public or company holidays and take their own holidays in lieu at another time. Floating holidays are appreciated by people whose personal or cultural preferences mean they wish to celebrate different occasions. Any policy that takes into account individual circumstances will prove popular.
- Flexible time off (FTO) allows people to take time off through the week as they see fit without having to formally make up the hours. This is particularly useful if you have varying childcare or healthcare demands on your time. Employers trust their people to make up the work lost in their own time. They are most likely doing this already anyway.
- Paid public holidays such as Thanksgiving, New Year’s Day and Labor Day are common. It is a way of giving (almost) the whole company a day away from work at the same time, offering a reset button for entire teams to come back refreshed after long weekends. The enforced opportunity to rest without losing income is important for every type of employee.
- Sick days support employees when they are ill or help them to take time off to care for someone else. They are sometimes partly paid up to an agreed amount, but rarely unlimited. This encourages a healthy working environment by limiting the spread of illness.
- Unlimited PTO allows people to take as much time off as they want. This requires a high degree of trust with their employer and should be managed effectively. If some managers are seen to be giving their people paid time off when they have unfinished work, the business will suffer. Self-regulation results – people don’t want to let their colleagues down.
Whenever you are looking at taking a new role, ask them about the time off arrangements and don’t be scared to dig into the details. It might be a little more complicated that it seems.
Key takeaways
Holidays are a key part of working life. Everyone needs to switch off and recharge their batteries, but it is important that the holidays of others do not put those still working at a disadvantage. Unlimited PTO is a great benefit if it does not impact the momentum of the organization.
- Unlimited paid time off is just one variant of holiday allowances.
- Every company will have slightly different rules and constraints.
- Read the small print to see how it works in practice.
- Talk to current employees to understand the impact of the policy.
