5 Pros and Cons of Unlimited PTO for Employers and Employees

The idea of unlimited PTO sounds enticing and almost imaginary to most employees. Having an endless vacation time without having to worry about how much PTO is accrued is less stressful and enticing. No more choosing between extra time off over the holidays and taking some time with the kids in the summer or working from home when you’re sick just to save the days off.

In the last few years, the idea of unlimited PTO has become a reality. Companies like Hubspot, GrubHub, and Netflix made news in 2015 when they were some of the first to offer this perk to employees. At first the news was good. Employers who care about their employees give them choice and better work/life balance.

Since that time, there has been a growing dark side to unlimited PTO. Employees are complaining about work cultures where peers are competing to show who is the most “loyal” by not taking any PTO. With the pressure to take less vacation than you would normally with accrued vacation hours, some job seekers are thinking twice about this perk as a benefit and may actually see unlimited PTO as a disincentive to apply for a position.

While unlimited PTO can be a cost savings for a company no longer required to pay unused vacation leave to departing employees, the practice may be less of a benefit for employees and employers than you think.

Related content: How to Leverage Company Benefits to Recruit and Retain Top Talent

Read on to discover the pros and cons of unlimited PTO, before deciding to implement within a company.

Pro/Con Set 1:

Pro: Employees Can Rest Up and Rejuvenate: Unlimited PTO offers employees a better chance of having more time to take for themselves. Getting away from the office for a few days has always been the norm. However, without any PTO limits, employees have the freedom to take more time off when appropriate and they’re able to schedule vacation anytime that’s convenient for them.

Freedom of unlimited PTO allows employees to take more frequent trips and travel to vacation destinations often not feasible under traditional PTO policies. It’s the perfect way to prevent burnout and improve productivity.

Con: Fear of Employees Abusing It: The problem with having unlimited PTO is that employees can sometimes abuse it. This can result in employees taking more than a couple of weeks or even extending to several months off, without being afraid of losing their jobs.

No employer wants to get stuck in this situation, so experimenting with unlimited PTO is imperative. Employers should review PTO days taken and how often PTO has been used throughout the year.

Pro/Con Set 2:

Pro: Productivity Increases: Employers have discovered that giving employees sufficient time off to relax and rejuvenate promotes more productivity. Employee burnout is a real problem and can lead to stressful situations and confrontations. Encouraging employees to take time off helps them improve their overall performance once they return from vacation.

In addition to having a benefit such as unlimited PTO, the flexibility of this option is what boosts productivity levels. While individuals would normally accrue a specific amount of vacation time every pay period, some people may prefer to use all of their time off during the summer months when kids are out of school or over the holidays in order to travel to see distant family. Depending on when an employee is hired, the vacation time required may not be available at the time of most optimal time of year for that person. Knowing that the vacation time is available on demand, may encourage employees to feel more engaged the rest of the year.

Related content: 5 Ways HR Can Improve Employee Productivity

Con: Vacations May Overlap: Vacation overlap and unavailability is a strong concern for most employers. Offering unlimited PTO can increase the chances of multiple employees taking time off at the same time. It’s a viable concern. However, the process for planning employee time off shouldn’t look any different whether that time is limited or not.

Employees must request time off, but also must coordinate with their manager and teams to avoid vacations overlapping. Allowing four people time off in the same department may not work best for productivity. Accountability plays a big part here, as does vacation tracking and scheduling.

Pro/Con Set 3:

Pro: Companies Enjoy the Savings: A typical PTO policy usually results in unused days at the end of the year. What usually happens is when employees retire or quit, employers are required to pay out those unused vacation dates.

With an unlimited PTO policy there is no accrual of time off. So, if an employee leaves or quits the company, the employer has no obligation to pay them. This significantly reduces the costs of having to pay employees for unused PTO and may be one of the most compelling factors for companies considering an unlimited PTO policy.

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Con: Negative Management and Leader Perceptions: Even if unlimited PTO is available, there is now strong evidence that many employees don’t take advantage of such a benefit and may not take any time off at all. This can sometimes happen due to management or leadership perceptions.

For instance, if a leader or manager takes very few vacation days each year, employees under that superior may feel less inclined to take time off. Not using available PTO could be a sign of guilt or simply fear that taking PTO will result in poor annual reviews and less status within a team. Employees may look up to leaders as role models and feel that taking more time off than others in the team or more than a superior may be perceived as a sign of lack of support or dedication.

Pro/Con Set 4:

Pro: Recruiting and Retention is Easier: One of the benefits of unlimited PTO is that it’s a useful asset for talent acquisition. It’s a perk that’s not offered everywhere just yet. And, companies are seeing it as an enticing bargaining chip.

Moreover, employers know that employee perks must stay competitive to have an advantage over the competition. Introducing a perk like unlimited PTO can draw more employees to prospective employers. In addition, it has the potential to help organizations retain employees longer.

Con: Expectations Aren’t Clear: Despite PTO being unlimited, expectations can become lost in translation concerning time to take off. For instance, if an employee isn’t aware of how much PTO they can use or when to schedule it, the stress may surmount, resulting in employees not taking PTO at all. A perk that was designed to create choice and take away the stigma of the US being a no vacation nation can easily backfire and cause burnout.

Managers and leaders should also have set expectations. Simply because PTO is unlimited, doesn’t mean it should permit employees to take off the entire summer. Careful management and tracking of vacation time should still be implemented.

Pro/Con Set 5:

Pro: Employees Gain Trust and Flexibility: The best benefit to unlimited PTO for employees is the trust they’ll gain with employers. For unlimited PTO to be a success, employers must extend a level of trust to their employees. They must believe that employees will be mindful of the perk and utilize it appropriately.

Trust must be earned both ways; unfortunately, some employees don’t trust their company leaders or bosses. Statistics from the 2017 Employee Engagement & Loyalty Statistics indicated that 33% of employees approve of the trust level at their companies and 35% do not trust company leadership. Offering unlimited PTO can boost those trust levels and improve employee relations.

Con: Implementation Can be Difficult: One of the main reasons an unlimited PTO policy isn’t introduced is because it may be more difficult to implement. The primary issue is the fear that employees will take time off at the same time. Other concerns may be employee ire due to losing accrued PTO that could’ve been paid out, discomfort taking extended time off, or being reviewed poorly by peers for taking time off.

Clear PTO policies and vacation tracking can help prevent employees from taking PTO at the same time. Other concerns must be addressed through meetings and HR input. Yet, implementing unlimited PTO isn’t something that should be done quickly. It takes time, planning, and testing.

Even if employers seem keen to begin an unlimited PTO policy, the problem is that it doesn’t always work for all jobs. Unlimited PTO perks work best for smaller companies that have a culture based on results, not hourly employee dedication. Hourly jobs and workers wouldn’t benefit from unlimited PTO. Jobs such as call centers, customer service reps, and tech support currently are not the best candidates for unlimited PTO.

A strong company culture, trust, and transparency are traits that best fit an unlimited PTO policy. Great management and vacation tracking, among company goals, can make an open PTO policy a reality.