Less than 10% of US organizations offer unlimited paid time off, despite the point that over 70% of employees say they want it.
Unlimited Paid Time Off (PTO) is one of those workplace perks that everyone’s talking about these days– Employees have the freedom to take as much time off as they want, without worrying about using up a finite number of vacation days.
I know what you’re thinking…that sounds costly and may result in less productivity.
The reality of unlimited PTO is complicated—and not always in the way you might expect.
When companies first began offering unlimited PTO, the expectation was that employees would take more time off, leading to a happier, more balanced workforce. However, studies and surveys tell a different story.
According to a 2018 survey by HR consultancy Namely, employees with unlimited PTO took an average of just 13 days off per year. This is notably less than the 15 to 20 days typically taken under traditional, structured PTO plans.
Other studies, like those from MetLife and Kronos, have shown similar findings, suggesting that unlimited PTO often leads to fewer days off, not more.
You might wonder why employees aren't taking full advantage of unlimited PTO. The reasons are varied and complex, often tied to workplace culture and employee perceptions, such as...
Uncertainty About Norms– With no set limit, employees can feel uncertain about how much time off is considered "acceptable." Without clear guidelines, they may worry about taking too many days and appearing less committed to their work.
Fear of Judgment– In environments where there is strong competition or a high expectation of dedication, employees might fear being judged by their peers or managers if they take what they perceive as "too much" time off.
Work Culture– Some company cultures subtly discourage taking time off, regardless of official policies. If leadership rarely takes time off or if there’s an unspoken expectation to always be available, employees may follow suit, even if unlimited PTO is on the table.
Unlimited PTO can be both a blessing and a curse.
On the one hand, it gives employees the time they need to recharge, offers flexibility and trust to improve culture, and can be a great selling point when recruiting talent.
On the other hand, if employees are either overusing it or underusing it, could lead to less engagement, more burnout, reduced productivity, and lower overall success and growth for the company.
To address these challenges, some companies are providing more structure around unlimited PTO.
This might include setting expectations about the minimum number of days employees should take off, encouraging regular vacations, or leading by example with managers taking their own time off.
Employee interest
A MetLife study found that 72% of workers were interested in working under an unlimited PTO policy.
Work-life balance
Employees with unlimited PTO report a better work-life balance than those with a fixed amount of PTO.
Recruitment
Unlimited PTO can help companies attract and retain top talent.
Morale
Unlimited PTO policies can boost morale.
Work-life un-balance
Employees hesitate to take enough time off because it feels unclear or unstructured, unsure about what constitutes an acceptable amount of time off. Or they take too much time off, decrease productivity expectations, and create issues within the team.
Hard to Manage
HR is challenged with keeping track of exactly how much time employees take off, or ensuring all employees take an adequate amount of time off. Are they happier? More or less productive?
Scheduling difficulties
Employees taking more days off can affect schedules and staffing issues that are more challenging to manage.
Unlimited PTO started off with some challenges so you may be hesitant to implement it in your own business. This is a smart approach. Find what works best for your situation. It may or may not work for your business needs.
Alternative options to consider might be taking on a hybrid approach or a flexible model.
Hybrid Time Off
A hybrid option could include unlimited PTO (non-consecutive) with a floating holiday. Perhaps we might refer to this as Hybrid Time Off, or HTO.
The ‘unlimited’ PTO may be limited to only non-consecutive single days but also includes a floating holiday (paid period off) that the employee can decide when to use. This floating holiday “floats” or moves to the date(s) when the employee requests to take it each year, and is in addition to the typical paid holidays that most employers provide.
This is appealing for companies because it’s easier to control and manage PTO, but less appealing to employees looking for more flexibility.
Flexible Time Off
A more recent trend in PTO policy is Flexible Time Off, or FTO, and is often more acceptable overall by both employers and employees as an alternative to unlimited PTO.
The employer allows for flexibility in how much time off each employee needs, provided that they complete their work on time and to a high standard, and the FTO is based on trust and mutual respect. This can be highly valued by employees and increase job satisfaction.
Here are the biggest benefits of flexible time off...
For the EMPLOYER -
Mutual trust: Promotes mutual trust between employees and employers.
HR Efficiency: Easier to manage, categorize, and measure. Reduces turnover, and improves company culture.
Employee retention: can improve employee retention, loyalty, and productivity, by increasing employee satisfaction and happiness.
For the EMPLOYEE -
Mutual trust: Promotes mutual trust between employees and employers.
Work-life balance: Helps employees balance their work and personal lives, and reduces employee stress and burnout.
Immediate access: Employees don't have to wait to accrue it.
Unlimited PTO (or other options) are attractive on paper, but their effectiveness depends largely on how it’s implemented in each company.
For unlimited PTO to work as intended, companies need to foster an environment where taking time off is not just allowed but encouraged. Otherwise, the promise of unlimited vacation days might end up being more of a burden than a benefit.
It is important to be mutually clear on the expectations and goals of employees, whichever path you choose, and to establish a way to measure its effectiveness on the company's long-term success.
Your PEO should help you but it's best to have guidance. Don’t go at it alone. Speak to a specialist today to help get you on the right path...