Paid time off (PTO) has gained popularity and replaced the older model of vacation and sick days. It gives employees the flexibility to use their paid days off as they please. A WorldatWork report found that 90 percent of businesses felt that it was essential to offer employees PTO. While rare, some companies have begun offering unlimited PTO, such as Sony Electronics, Roku, and HubSpot. The idea of unlimited PTO remains rare because there are as many cons as there are pros for such a program. It comes down to the company and its culture. Here's a look at a few of the Pros and Cons.
Pros
The advantages of unlimited PTO can be broken down into three individual categories.
Reduced Admin Time
Each time an employee requests time off, someone has to check their available paid days off and approve or deny the request. After the employee takes the day off, you need to remove those hours from the person's available PTO time. If you don’t use a PTO plan at all, you have to note if it's vacation, sick time, jury duty, and other categories. This can consume many hours that your HR department can use for other tasks.
Cost-Effective
Some companies allow their employees to cash out any unused PTO at the end of the year or every two years while others require it. When you offer unlimited PTO, you don't need to pay these funds out to employees. This payout is on top of the person's regular salary or hourly wage, and this cash out can cost a lot of money each year if employees opt not to take time off.
Increased Flexibility Boosts Morale
The ability to take time off when they need to is vital to your staff. Some don't take time off if they're going to lose pay, and this can lead to resentment or burnout. Unlimited PTO leads to flexibility for your employees, which boosts morale and employee engagement. This engagement is beneficial for your business. If your employees are engaged, you might see up to a 21 percent increase in profitability.
Cons
While there are impressive reasons to create an unlimited PTO policy, there are also some significant cons that you need to consider. You need all the information before making an informed decision.
Abuse or Misuse
You don't want a flood of requests for paid time off with one or two of your employees using the policy to shorten their workweek to three or four days every week. When this happens, management is forced to take action. If you offer the benefit, you need to make it available to all your staff.
Underused
According to the U.S. Travel Association, a stunning 768 million vacation days went unused in 2018. When you offer unlimited PTO, you may find that your workers simply don't take any time off. Taking time off from work can help reduce stress and boost productivity. If you have employees who are competing with each other to see who can take the fewest days off, you might need the management team to set an example of responsibly using vacation days to recharge and relax.
Overlapping Vacation Days
You don't want to arrive at the office or warehouse only to find a couple of people working because there are too many employees taking overlapping vacation days. You can avoid this type of issue by creating a master calendar with everyone signing up for days they know they want off. If you really want to provide unlimited PTO as a benefit, you can find ways around this issue.
Can't Use PTO as a Reward
Some companies use PTO as a reward for the highest sales or some other benchmark. If you switch to unlimited PTO, you can no longer offer time off as an incentive. You might need to come up with a new plan for rewards or rely on the improved morale with this benefit to compensate for losing the reward. The increased productivity from a workforce that can take time off to relax and unwind might make up for the lost reward system. Not all companies use PTO as part of the reward system, so it might not even be an issue for your situation.
There are many reasons for and against offering unlimited PTO as a company benefit. The success or failure of this benefit truly falls on the culture of the corporation. When you talk to other business owners, you're likely to hear many stories of failure and some successes. Limiting the amount of PTO you offer seems to work in a broader spectrum of company cultures, which explains the number of stories of failure. That said, unlimited PTO might just be right for you.
