5 ways unlimited PTO could burn your company

When faced with a wealth of possibilities, employees are often confused as to how many days off they can take. They often end up taking the standard amount.

Unlimited time off is on everyone’s mind these days, with companies from Netflix to LinkedIn to Virgin, Workday, General Electric, tech company VMware, video game developer Riot Games, and Twitter allowing their employees to take as many days off as they want during the year. While the concept may have reached a media saturation point, the actual reach of unlimited time off is limited – only 1% of U.S. companies have it, according to to the Society for Human Resources Management (SHRM), as reported in Fortune.

Still, the concept, hailed as the savior of the vacation conundrum, has recently begun to show cracks in its facade as companies have used their unlimited PTO plans long enough to discover their difficulties with them. While as much time off as we could take still sounds great, here are some emerging problems.


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1. People don’t use it

When faced with a wealth of possibilities, employees are often confused as to how many days off they can or should take. Often, they end up taking close to the standard amount of vacation days they would have gotten anyway. “It seems to indicate that employees are not taking any more or less” vacation days, says Bruce Elliot of SHRM, to Fortune. Kickstarter even got rid of its unlimited PTO policy because it found employees were taking less time off, not more, because they weren’t sure what was appropriate.

“However, and ironically, many workers do not take time off with unlimited PTO policies either, as they do not want to appear to be taking advantage of the company’s generosity,” John Challenger, CEO of outplacement firm Challenger, Gray & Christmas, told WTTW.

No rules doesn’t always lead to freedom; in the workplace, it often just leads to confusion.

2. Employees might sue the company over unused vacation days

The Tribune company ended its unlimited PTO policy in 2014; when they launched it, some threatened to sue over the “lost monetary value of years of accumulated time off,” according to Fortune.

3. What if you quit or are laid off?

Does your employer owe you your accrued vacation time? Here’s where things get sticky. If you’re laid off or quit and have a traditional vacation policy, you often get paid out for your unused days “as a show of goodwill,” according to the Washington Post. Employers will often pay out your accrued vacation days even in states where they’re not required. But with unlimited plans, you’re often not owed anything at all – and the company saves money.

“It’s great not to have to pay out [accrued vacation] when people leave,” Maggie Grover, a partner at law firm Wendel, Rosen, Black & Dean LLP told HR Dive in a story about the ups and downs of unlimited PTO.

4. How employees use it depends on cues from senior management

Employees look to bosses for cues on how much time off is appropriate to take, especially when there are no rules. Unfortunately, bosses aren’t always setting the best examples, and employees may lose out on some much-needed time off.

“If your manager takes three days a year, employees get the message that they shouldn’t take much,” Daniel F. Pyne III, a shareholder at Silicon Valley law firm Hopkins & Carley, told HR Dive.

5. It’s less a perk and more of a recruiting tool

Between confusion on how much “unlimited” days off to actually use before getting in trouble, and not using that many more days off to begin with – “unlimited” is beginning to feel like something that’s best in theory – or recruiting. A 2017 study found that 51% of people would take a job for 10% less pay if the job offered unlimited PTO, according to a Forbes story.

Unlimited PTO is mostly something that works well at the bargaining table, where instead of presenting a prospective employee with a 2-week vacation plan they’re not happy with, the employer can wow them with an “unlimited” plan and call it a day. “Unlimited means you don’t have to negotiate,” Rich Ruestenberg, a senior partner at human resources consulting firm Mercer, told HR Dive.

Now, everyone with an unlimited PTO plan, it’s time to put in for a four-week vacation and see what happens …


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Sheila McClear|is a reporter for Ladders and can be reached at smcclear@theladders.com.