Unlimited PTO – Friend or Foe?

We touched on this issue briefly in a previous post on new trends in employee benefits. This can be and is a powerful recruiting tool. But is it a good thing or a bad thing? There are several pros and cons to consider.

Unlimited PTO originated in start-up tech firms – no surprise — and has spread from there. Those firms tend to work as ROWE firms to begin with (results-only work environment). What matters to management in ROWE firms is not how many hours an employee spends doing their job, but how productive they are whenever or wherever they do their job.

The concept for unlimited PTO is exactly as the name implies: employees are allowed to take as much time as they need for vacation, sick leave, kid’s soccer games or family emergencies. Employees are charged with managing their own time and responsibilities as long as they get their work done.

Sounds simple, right?

Pros:

There is no more keeping track of vacation time spent or accrued; there’s no paying out unused PTO to an employee who leaves, since it does not accrue; there’s an element of trust that stems from the fact that you are allowing the employee to set their own schedule, it says to your employees that yes, you trust them to do the best thing for themselves and your company. All that is very valuable, not to mention the above-mentioned fact that it’s a wonderful recruiting tool.

Unlimited PTO can get rid of the “end of the year” rush to utilize un-used time that will expire. It can also encourage people to stay home when they’re sick instead of coming in and sharing their illness with everyone.

No one doubts the fact that employees need to take time off. Companies that encourage employees to take time to re-energize and re-charge are appreciated and tend to attract and keep good employees. Happy workers are productive workers. But unlimited PTO is not best for everyone.

Cons:

This type of benefit would not work well with a manufacturing plant, for example, where schedules and work product have to be maintained at all times. Or if a company has many employees, managing numerous schedules quickly becomes difficult if not impossible. What if everyone wants to take time off at the same time?

Companies need to make sure the benefit is applied equally to everyone. Sometimes that’s just not possible. Sometimes employees will take less vacation with an unlimited policy, internally debating how much is too much? They tend to err on the side of caution which defeats the whole point of the benefit.

What’s best for you?

Small firms that already have a culture that is results-oriented are ideal. If they already reward work product instead of hours spent at the grindstone, they’re already half way there. Take the time to really develop your policy in detail prior to an implementation, so everyone is clear on expectations.

To manage unlimited PTO, requiring pre-approval from a manager or supervisor can help to solve scheduling issues.

And of course, good communication is the key to making the program a success. To avoid abuse of an unlimited PTO system, make sure you have regular performance reviews to set and review goals. Employees must know what’s expected of them.

Bottom line, for the right company, unlimited PTO can be a terrific benefit that can actually end up improving your bottom line. It’s not for everyone, but that’s okay. If you think it might work for your company, take the time to research and develop a detailed plan. Good luck!

 

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