Is unlimited PTO a trap?

Unlimited PTO has been a dominant trend over the past few years, especially amongst tech companies and startups. But while many companies do indeed offer this benefit, most people understand (in an unspoken sort of way) that “unlimited” is never really, well, unlimited. The truth is, if it was actually treated as such, few companies would be able to function.

And herein is the trap: unlimited PTO has the weight of psychology to buoy it—it’s a golden offering very few people can actually use. In fact, there are plenty of reasons why unlimited PTO can actually work against morale and productivity. Ironically, employee satisfaction and retention are among the most common reasons for offering unlimited PTO in the first place.

But, as with anything, the key to making it work comes down to understanding the pros and cons of this approach, as well as knowing how to realistically manage expectations.

What is unlimited PTO?

Supposedly, it is what it sounds like: a policy that grants employees as much time off as they desire, without affecting their pay. Employers know that employees who are happier, more fulfilled, and relaxed are more likely to want to keep their jobs and remain loyal to the company—so in theory, it strengthens employer-employee relationships and is good for all parties.

That being said, some companies see it as a way of mitigating the risk of turnover rather than a way of cultivating a positive company culture. And really, the success of any policy tends to be in the deeply ingrained attitudes of those running the show.

So let’s consider the pros and cons of unlimited PTO, shall we?

What’s in it for employers?

Why would your company consider offering unlimited PTO? Or—what’s the logic underlying your current unlimited PTO offering?

Ease of recruitment

Unlimited PTO is likely to aid in your recruitment and hiring efforts because it sounds good, simply. According to a Metlife Survey, unlimited PTO is among the most coveted benefits across generations—80% of millennials, 70% of gen Xers, and 63% of boomers agree.

Perhaps it’s because employees can take time off without wondering whether they have enough vacation days left—and even if they don’t take time off, they know they can. They feel valued by their employer. In our current age of overwork, chronic stress, and burnout, that’s not nothing.

Less administrative work

One massive benefit of offering unlimited PTO is that there’s no PTO accrual to contend with. This means you won’t need to pay employees for unused PTO at the end of the year, as you would with a limited time off policy.

This lessens and simplifies the administrative workload significantly, because it means not having to keep track of how much PTO employees are earning and using over time—a task which entails complicated annual calculations and quickly becomes overwhelming if you have a large staff.

Cost savings

Non-intuitive as it may be, unlimited PTO can save your business money. Why? For the simple reason that you are not required to pay for unused vacation days.

On the contrary, with limited time off policies, many employers are expected to pay employees for unused PTO before they leave the company. The cost difference, depending on the size of your staff and how often they leave PTO unused, can be huge.

Downsides of unlimited PTO for employers

Unlimited PTO has a few clear drawbacks for employers as well:

PTO overuse

Although most employees do not tend to overuse or abuse of unlimited PTO, the potential for abuse is still there. Some employees may choose to take advantage, and begin taking extra long vacations or frequent sick or mental health days just because they can.

Obviously this can cause understaffing issues, productivity bottlenecks, and an increased workload for other employees, which isn’t good for overall morale or retention. 

Potential for mismanagement

Having unlimited PTO can, at times, make getting work done a challenge. Certain employee-types (those more likely to abuse unlimited PTO), may be less likely to keep up with their work.

In turn, this can lead to work piling up, unmet deadlines, delayed/rescheduled meetings, and ignored emails—to just name a few. In other words: the opposite of a well-oiled machine.

PTO underuse

According to the SHRM, companies that offer unlimited PTO unofficially cap vacation at three to six weeks. But research shows that those with unlimited PTO typically take only 13 days off annually, which is two days fewer than those working under traditional PTO policies.

It turns out that the concept of unlimited PTO causes uncertainty and anxiety, making employees more hesitant to take time off. Not knowing how much PTO is “reasonable” prevents employees from taking adequate time off for their basic wellbeing—and a lack of employee wellbeing can be very bad for your bottom line.

Benefits of unlimited PTO for employees

Given that the majority of employees count unlimited PTO among their most prized benefits, it’s worth considering the benefits to your staff:

Mental health

When used properly, unlimited PTO has undeniable (and invaluable) potential to help employees maintain a healthy work-life balance, which is crucial to their mental health and overall wellbeing.

There’s a good reason some employees rank work-life balance as more valuable than health benefits. After all, the former prevents burnout and is ultimately a form of preventative healthcare.

Flexibility

Unlimited PTO grants employees the freedom to decide when they need time off and how long they will be away—without the added burden of justifying these choices. This flexibility can make it a lot easier for people who have kids or other dependents to take needed time off without feeling they are letting their employer or their colleagues down by doing so.

Morale & productivity

Employees who are allowed to decide for themselves how much time off they require tend to feel more valued and respected by the company, and by extension, more motivated to do a fantastic job. The result is increased employee morale and productivity, and higher customer satisfaction—all of which are great for business—not to mention your company’s reputation overall.

Drawbacks for employees

Disadvantages for employees signal disadvantages for employers, and vice versa. Consider the following:

Burnout

Since unlimited PTO policies tend to do the unexpected—often discouraging employees from taking their rightful time off each year—increased burnout among staff is a sure sign that your unlimited PTO policy is backfiring. In these cases, you might see an overall decrease in productivity and motivation, and a rise in your turnover rate, all of which are bad for the overall employee experience and for the company as a whole.

Workplace animosity

While unlimited PTO is all about affording employees the trust to manage their own lives, in cases where employees overuse the policy, colleagues who must pick up the slack may begin to feel resentful, leading to workplace animosity. And on the flip side, personality types who care more about what their coworkers think of them may end up taking fewer days off than they should. Either way, the dynamic is flawed.

Lack of work-life balance

Typically, when an employee plans to use PTO, their workload doubles in the lead-up to their time away. What’s more, nearly 30% of employees with unlimited PTO report working during their vacations—they’re twice as likely to do so as those with limited PTO.

And it doesn’t stop there: they also tend to work more upon returning to work to make up for lost time. Overall, this inability to completely unplug from the job may be fueled by the climate of uncertainty created by “unlimited” PTO policies. The clear result is a palpable lack of work-life balance.

How to make unlimited PTO work for your company

If unlimited PTO is your chosen approach and you’re sticking to it, taking steps to cultivate a positive company culture may be the key to making it work for your company—you know, one in which work-life balance is valued and respected, and mental wellbeing is taken seriously.

Encouraging employees to take time off is also an effective and direct way of contributing to a healthy work culture. You might set a positive example by taking time away from work yourself. Not only will you benefit immeasurably, but this will go a long way toward normalizing unapologetic time off among your employees and increasing the overall health of the business.

In short, do what it takes to create a climate in which employees feel comfortable rather than anxious about taking much needed time off.

Bottom line: companies that offer unlimited PTO must recognize the unique challenges their employees may face as a result, and be prepared to offer support and guidance accordingly—or else consider better-suited policy alternatives.