Pool tables, meditation spaces, open-concept office plans, and flexible working arrangements – the modern workplace is rapidly changing in order to attract and retain the world’s top talent.
And in an extreme effort to win this talent war, more and more companies including Sony, Hubspot, Dropbox, and GE now offer unlimited paid time off (PTO) as an extra perk for their workforce.
Yes, you read that correctly, unlimited paid days off for vacation, sickness, and bereavement.
In theory, unlimited PTO policies are intended to help build a sense of trust between employees and their employers. Employees feel in control of their own schedules, and employers benefit by having a highly committed and happy workforce.
Sounds like a win-win, right? Not necessarily.
While there are numerous benefits, unlimited PTO policies can have some unintended consequences.
Here’s a look at the pros and cons of offering your team unlimited PTO.
The Pros Of Unlimited Paid Time Off
Promotes a culture of trust
Mutual trust is a crucial pillar of the relationship between employers and their employees. Without it, teams cannot work effectively and it can be difficult to retain quality talent over time.
By offering unlimited PTO, companies are telling their employees that they trust them, their work is valuable, and that their ideas are more important than the number of days they spend physically in the office.
Employees, in turn, will appreciate the gesture of an unlimited PTO scheme. They will not only develop a sense of ownership of their work, but they will also be more likely to remain committed to the company.
Employees love unlimited PTO
Millennials and Generation Z are already proving difficult to recruit and retain. Often called “high maintenance” in the workplace, younger workers typically want a lot of responsibilities along with a flexible schedule, work from home options, and career development opportunities.
Unlimited PTO policies serve as another perk that comes in handy during the recruitment process of younger talent with high expectations. Especially considering younger people place a high priority on traveling and taking vacations, unlimited PTO policies can be very attractive to those younger individuals who spend their time and money on travel, rather than starting a family or buying a home.
Once hired, unlimited PTO policies also serve as a way to retain employees as well. If workers are used to being able to take as many vacation days per year as they want, they will be much less likely to be tempted to move to a different company without it.
No vacation payout
Another practical benefit of an unlimited PTO scheme is not having to payout for vacation time. Normally, vacation time is accrued over the year. And when an employee leaves, the company usually must pay them back for their earned but not used PTO.
However, in companies with unlimited PTO, the burden of a payout is no longer there. This is especially helpful for companies who struggle with staff turnover and frequently pay out for unused vacation days.
Improved employee morale and wellbeing
Improved employee morale, wellbeing, and happiness is another benefit of unlimited PTO.
With unlimited PTO, employees feel more in control of their work and personal lives. Even if they do not decide to take a lot of vacation time in a year, the fact that they know that they could if they wanted can have a huge impact on mental health and wellbeing.
Additionally, unlimited PTO policies allow employees to stay home when they are feeling unwell. Sometimes, employees feel pressured to go to work even when they are sick in order to not lose any vacation days for the year. Attending work while sick is not only bad for the individual, it can also have a negative impact on their teammates and even customers.
By offering unlimited PTO, employees can feel like they can take off when they are sick without being punished.
The Cons Of Unlimited Paid Time Off
It's difficult to implement unlimited PTO fairly
A major drawback of unlimited PTO policies is the fact that it is extremely difficult to implement them in a totally fair way. There are just some jobs out there that are not suitable for an unlimited PTO policy. Nurses, wait staff, factory workers, and other service professionals or laborers need to be physically at work each day to do their jobs.
And while unlimited PTO could be offered to upper management, this could likely cause tension, animosity, and distrust between staff and leadership. In order to implement unlimited PTO fairly, this type of situation must be taken into consideration and those employees without unlimited PTO must be fairly compensated in a different way.
Can lead to employee burnout
While many proponents of unlimited PTO claim that it helps employees feel in control of their work-life and personal wellbeing, in some cases it can actually have the opposite effect.
In working environments that place high importance on performance and success, some employees may feel guilty if they want to take one of their unlimited PTO days. In some cases, employees actually end up taking less vacation time under an unlimited PTO policy than they would have with a policy with set vacation days.
Employees like this often suffer from high stress and burnout caused by working too much. This can have a negative impact on productivity, trust, and commitment.
Unlimited PTO abuse
Unlimited PTO policies are not really meant to be “unlimited” – employees still have a job to do and practically speaking, not everyone can take a vacation all at one time. However, with any policy that grants employees free reign to take what they want, there will always be those few who abuse it and take more than they should.
Additionally, with an unlimited PTO policy in place, it can be extremely difficult to address these problem employees and terminate them for abusing the policy.
Employees now expect more from their employers than ever before. And while unlimited PTO may seem like a novel concept today, five years from now it may be standard practice.
That’s why it’s so important for HR practitioners to not only weigh the pros and cons of unlimited PTO, but they should also make an effort to understand exactly how it could practically be implemented in their own workplace in the future.