Is Unlimited PTO a Good Idea? Here’s Why It Can Be Problematic for Businesses

At first glance, unlimited PTO may sound like a great addition to any compensation package. Who wouldn’t want the ability to take off as many days as they want for their own health, childcare, side projectors, additional education, and just plain fun? But “unlimited” or “flexible” PTO often creates real-world problems when it’s applied in the workplace.

Studies have shown that while job ads offering benefits like unlimited vacation time have increased, employees with unlimited PTO actually take fewer vacation days than those without it.

Is this a problem? It absolutely can be when it comes to employee health, work-life balance, workplace practices, and employee turnover.

Here’s a look at the issue, its causes, and how organizations can address it.

What Exactly is Unlimited PTO?

With unlimited PTO, employees are not given a set number of days off. Instead, employees can take off as much time as they want, so long as it doesn’t disrupt business operations significantly or affect productivity beyond a certain point.

Typically, employees must request PTO before taking days off (few organizations allow employees to go on on leave with no notice) and they must notify their supervisors of any emergencies that arise. This gives employees and their managers the freedom to arrange days off when they need them. The policy is also designed to encourage employees to take more vacation time for their mental health.

Company policies on unlimited PTO can vary. Some companies implement reasonable limits to their time-off policies, while others tweak the PTO guidelines to accommodate the job responsibilities of certain positions.

Regardless of the particulars of your Unlimited PTO policy, it’s important to explain the plan thoroughly and with clear language so everyone in the organization understands all the fine print.

The Pros and Cons of Unlimited Vacation Days

Like with every company policy or benefit plan, unlimited PTO comes with its positives and negatives. Below is a summary of the most common pros and cons.

The Pros of Unlimited PTO

• When used correctly, unlimited PTO can provide a solution to the employee dilemma of creating a healthy work-life balance.
• When employees take time off, their health, productivity, and overall satisfaction often increases.
• Unlimited PTO can help avoid common employee practices that hurt businesses, like hoarding PTO days or not using PTO to tend to critical family or personal obligations for fear of running out of paid leave.
• Unlimited PTO is frequently used to help attract new talent looking for more flexible jobs.
• In a workplace with unlimited PTO that is approved appropriately, certain bad habits may be less likely to develop, like micromanagement and passive-aggressive behavior.
• Unlimited PTO can help improve employee retention over time.
• Few employees abuse the unlimited system, and most understand that they still need to fulfill their responsibilities and meet deadlines.

The Cons to Unlimited PTO

• Unlimited PTO is not always offered in good faith. Some organizations offer it alongside the expectation to work overtime and crunch time—to the detriment of employee health.
• Employees—especially new team members—may feel office pressure to not take vacation time in order to “prove” themselves. This is compounded by the fact that unlimited PTO doesn’t include any PTO that “expires” at a certain date, removing the motivation to use it before it’s gone.
• Other organizations require PTO requests go through management, but deny most PTO requests—even though PTO is supposed to be unlimited.
• Sometimes companies use unlimited PTO as a legal maneuver to avoid paying employees that leave the company. In many states, employers are required to pay for unused paid time that employees have accrued. If PTO is unlimited, then it isn’t calculated, and compensation isn’t mandated.
• Unlimited PTO is relatively uncommon in many industries, and employees unfamiliar with the concept may be confused as to the appropriate amount of time to use and when to use it.
• A set amount of PTO time can sometimes make employees more comfortable with taking days off, as there is less uncertainty about how it will affect their careers.
• Leadership may give undue preference to those who take less PTO.
• In industries that are highly schedule dependent, unlimited PTO can require more complex scheduling, which can dramatically increase the workload for management.
• Unlimited PTO can allow managers to play favorites, granting PTO to some employees but not allowing it for others.

Why Aren’t People Taking Advantage of Flexible Vacation Policies?

Employees that are offered unlimited PTO sometimes use even less PTO than they normally would have. One possible reason for this may be that they worry about what will happen if they take too much time off.

Employees may feel pressured to use less PTO in an effort to keep up with co-workers, impress their bosses, or meet deadlines. This is especially true of workaholics and others who feel a need to push forward in the company and prove themselves.

Organizations that encourage this type of overwork contribute to the problem, especially in competitive industries. If employees fear that they won’t be able to find a job elsewhere, they may decide to avoid using their unlimited PTO in an effort to remain employed longer.

What’s the Solution for Managing PTO?

Managing PTO—especially unlimited PTO—can often cause a scheduling nightmare for managers. The best way to ensure this doesn’t happen is to take several preventative measures.

Solutions include:

• Create a required minimum set of days off—This is an increasingly popular strategy that solves many unlimited PTO problems. It allows time off to accrue to a certain point, while requiring employees to take a certain amount of time off (in addition to paid vacation days) for their health or important events. Typically, required PTO is set for the year, but the exact days can vary.
• Mandate vacations—Besides encouraging the use of PTO for emergencies, organizations can require employees use a certain percentage of their vacation time. Some companies can create a required vacation week where they can arrange for everything to shut down, or arrange to make several weekends three-day weekends to give employees vital rest. Or organizations may want to leave it up to individual teams, providing guidelines like, “Your team has two days a month to take off as a whole, decide when you want them to be.”
• Use limited PTO, but with unlimited rollovers—In this situation, PTO is limited in traditional ways, but PTO days are not lost with time; they can continue to build over time so that employees can choose to take long vacations or have a large bank of PTO that can be used in important circumstances. This removes the pressure to use PTOwithin a certain period of time and rewards employees for hard work while still allowing them a large amount of freedom for time off.Though this doesn’t always work for every industry.
• Use software to manage PTO requests—Software can eliminate some of the scheduling tasks managers need to take care of, which can free them up to focus on other duties. Software can also prevent managers from mismanaging PTO requests and help them track which employees aren’t using PTO and may be at risk of burnout.
• Create detailed guidelines—These guidelines should clarify that flexible PTO is for employee health, and can be used for anything from mental health days to taking care of an emergency, or managing childcare at important times. If employees see their organization encouraging PTO use and have several examples of how it’s okay to use their PTO, they are much more likely to take the days off they need.
• Set reminders—Remind employees of their flexible PTO options at important times like back to school, tax season, and more.

The challenges of unlimited PTO are an excellent example of why it’s important to carefully craft compensation packages and understand their impact on the workplace in practices.

HR professionals should take the time to discuss unlimited PTO with potential hires and new employees. KnowledgeCity’s guide to recruiting and the interview process may have some helpful tips for those who want to learn more.

HR leaders may also be interested in our course on Policy, Procedure, and Human Resources, as well as Developing and Writing Policies for Human Resources Professionals.