The pros and cons of unlimited paid time off (PTO)

The workplace is changing, with employers and employees alike starting to question standards like the 40-hour work week, office culture and even vacation time.

Some companies are going so far as to offer unlimited paid time off (PTO) as a perk for employees. That means they get as many vacation, mental-health and sick days as they may need so long as they’re meeting performance expectations.

While it may seem an easy way for employees to take advantage of employers, studies show most people who are offered unlimited PTO take about the same amount of time off as employees who work with limited PTO structures. If your business is considering unlimited PTO, here are some of the pros and cons to consider.

Follow Ladders on Flipboard!

Follow Ladders’ magazines on Flipboard covering Happiness, Productivity, Job Satisfaction, Neuroscience, and more!

The cons of paid time off (PTO)

You can’t use PTO as a reward

Increased vacation time is an effective reward, often given to employees who have remained with the company for long periods of time. But if you switch to unlimited PTO, you’ll have to boost retention in other ways.

It can be a tough transition

Going from standard vacation time to unlimited PTO can be a major change for your HR department. The transition may be rocky at first, but after the initial bumps, unlimited PTO is often easier for HR departments to administer. For example, they no longer need to track and enforce vacation hours against a rigid schedule.

Days off can overlap

There could be some HR headaches in store if a policy of unlimited PTO leads to multiple overlapping vacations. This comes back to trust, though. Can you trust your employees to effectively manage their schedules, even with unlimited PTO, so that there is always effective coverage?

You need very clear guidelines

Overlap is just one reason why it’s important to set clear guidelines and procedures for unlimited PTO. Leaving employees confused about when and how they can take time off can actually make them more confused and stressed, wiping out many of the benefits of unlimited PTO.

The pros of paid time off (PTO)

Unlimited PTO can save you money

It sounds counter-intuitive, but you could actually save money by offering unlimited PTO. Employers frequently have to pay out unused vacation time to employees leaving the company. With unlimited PTO there is no unused time to pay out.

It can improve employee results …

When employees can choose their own amount of PTO, they can be less inclined to just appear busy for the sake of being busy. In fact, they may actually perform better while they’re at work.

… and increase employee happiness

A study by the CDC found that long work hours could be associated with increased alcohol use, increased smoking, unhealthy weight gain and even increased early mortality. Allowing employees to choose their own time off, and possibly set their own schedules, can boost happiness.

Employees can feel more trusted

Employees with unlimited PTO feel trusted and empowered. This can be more important than it may sound. Some dire statistics from 2017 show that only half of the employees had confidence in their company’s senior leaders and just 59% of employees trusted the people on their team. That has consequences, as workers with higher confidence are five times more likely to stay at their company.

It may increase productivity

Expounding on what we said earlier, giving employees adequate time to relax and recharge can actually increase productivity. The CDC study showed a drop off in productivity among employees who were overworked. They showed deterioration in performance and a slower pace of work after a certain amount of hours. Knowing they can take the time they need can help.

Is unlimited PTO right for my company?

Keep in mind that an unlimited PTO policy doesn’t work for every company. It’s usually best suited for cultures that are already highly goal-oriented and track employee performance.

Michelle McGuinness is a staff writer at Spoke. Built from the ground up to power the on-demand workplace and deliver immediate access to knowledge and support, Spoke’s AI answers the repetitive questions (more than half of all requests in some cases) — so support teams can focus on people.