Unlimited PTO Policies: Weighing the Pros Against the Cons

THE CONCEPT OF unlimited PTO has been an option for companies to adopt for several years. Unlimited PTO policies basically do away with any current vacation and sick leave programs, replacing them with ones that allow employees to take as much time off as they deem appropriate. Unlimited PTO policies assume that employees will manage workloads correctly and effectively do their jobs while taking a suitable amount of time off. Like any policy, there are pros and cons to consider. Let’s identify some of them.

Pros:

1. One of the most obvious advantages to an unlimited PTO policy is the flexibility provided to employees. To be clear, employees typically cannot inform their managers they’re taking a week or two off whenever they feel like it. PTO still needs to be responsibly scheduled and managed. But the ability to avoid the concerns of the amount of PTO accrued and how to manage that dynamic essentially go away. When properly applied, an unlimited PTO policy can provide employees a better work-life balance and a healthier approach to their jobs. This type of environment can also contribute to a stronger company culture.
2. Unlimited PTO policies can create significant advantages in recruiting. If pay scale, health benefits, and other company perks are all equal in the choice between two companies and one offers unlimited PTO, a candidate will likely choose the unlimited PTO option. Members of the new generation entering the job market are searching for these types of benefits when evaluating their career opportunities.
3. Under an unlimited PTO policy there’s no financial liability for a vacation/sick leave payout when someone exits your company. Sometimes those liabilities can be significant.

Cons:

1. Perhaps the most obvious disadvantage to this policy is that inevitably some employees will abuse it. One would hope that a clear set of job expectations combined with sound company culture would prevent that, but we all know that doesn’t work for everyone. The simple solution to this would be to terminate someone abusing the policy. However, firing an employee for abusing a policy that doesn’t outline specific expectations can be complicated.
2. Company culture may actually backfire. For example, my nephew recently joined a business offering unlimited PTO. He was very clear in the interview process that he had a two-week trip planned three months down the road with airfare and accommodations already booked and paid for. He was reassured this wouldn’t be a problem with their unlimited PTO policy. But when the time came to take his vacation, his manager told him it would be a career mistake to take a two-week vacation only three months into the job and that he should cancel his trip. Other employees reflected a similar sentiment. The policy seemed like a great perk, but it quickly became clear there’s a significant amount of pressure to take as little PTO as possible. And as a result, their company culture suffers.

Determining whether your company should adopt an unlimited PTO policy is challenging. There are businesses that promote unlimited PTO as a significant perk to their employees, but then fail to execute the policy properly. On the other hand, I’m aware of several companies that have successfully implemented this policy, have created great company cultures, and can therefore attract quality employees. My overall recommendation is this: If you decide to adopt an unlimited PTO policy, make sure it’s administered in the fairest way possible to both your business and your employees. Only then will you find success.