Limited versus Unlimited PTO – Which one is Right for your Business?

Unlimited paid time off sounds too good to be true to some, but there are many companies out there that offer unlimited PTO as a benefit to employees. For example, popular companies such as Netflix, General Electric, and Dropbox all offer a variety of unlimited vacation time policies that allow their employees to have more control over their time away from the office. And those are just a few of the businesses that offer these policies. Many others, big and small alike, offer unlimited time away policies.

However, there are even more businesses that refrain from offering unlimited policies citing a host of reasons for not doing so. This article will look at both sides of the PTO benefit spectrum to help you know if unlimited or limited PTO is right for your business.

All in Favor

Companies who’ve implemented unlimited vacation time usually do so with several motivators. According to Netflix’s Work Life Philosophy, they “don’t set a holiday and vacation schedule, so you can observe what’s important to you—including when your mind and body need a break. We believe in working smarter, not harder.” This flexible approach shies away from restricting employees, allowing them to dictate when they need to step away.

Other companies highlight the trust factor. Work still must be done, but when used appropriately by employees and with a manager’s approval, unlimited PTO policies trust employees to be responsible and value an employee’s contribution to the team rather than the number of hours they spend in the office.

Unlimited PTO policies can also work as a selling point in recruitment. And beyond that, unlimited PTO can also offer companies a financial benefit. With unlimited PTO, companies can avoid the expense of paying out accrued banked time when an employee leaves their employ. Companies can also avoid the rush at the end of the year of employees seeking to “use up” their vacation or PTO time in an effort not to lose it.

Creating an Unlimited PTO Policy

After reviewing your company policies, if you decide unlimited PTO is right for you, proceed with caution. Whatever your reason for implementing an unlimited PTO policy, there are several things to be sure to include when creating your policy.

To begin, you might poll current employees on their thoughts and feelings about your current PTO policy and find out what changes they would like to see. Some employees relish the thought of unlimited time off, but others may see it as a way for the company to avoid paying accrued time or unfair to those who have put in their time with a company to achieve more time off. For example, Tribune Publishing (owner of the Los Angeles Times) sought to implement a new policy and received tremendous resistance from their employees resulting in the policy being rescinded just one week later.

To avoid confusion and employee backlash, be sure to communicate your policy or policy changes clearly. While you may offer unlimited time away, you need to include verbiage that sets your expectations. For example, you might include text that indicates how much time can be taken at one time, if advance notice is required and how much, as well as language that indicates that work responsibilities must be fulfilled prior to time away.

All Opposed

While unlimited time off sounds good in theory, it may simply not work in many industries where having workers present is necessary. Consider a production line or warehouse fulfillment facility—these environments require workers present daily to meet quotas and fulfill contracts or orders. Therefore, instituting a companywide unlimited time off policy would be unfair to employees who are needed daily to complete employment obligations.

It can also be difficult to fairly implement an unlimited PTO policy among employees who are able to be more absent from the office. Employees may feel differently than each other on how many days is okay or fair to be away from the office. Work ethics among employees vary and resentment between employees could be a resulting factor. Other companies see unlimited time off as unnecessary. With time allocated for vacation, sickness, and personal time, they feel unlimited time away isn’t justified or needed for their employees.

Creating a Limited PTO Policy

While you may not be able or willing to institute an unlimited PTO policy, that doesn’t mean you can’t be competitive in recruiting or create a policy advantageous to employees. Just like unlimited policies, the first step to implementing a successful limited PTO policy is to communicate it clearly with employees.

Things to discuss and decide on beyond the number of days include whether or not PTO rollover is permitted, when and how PTO accruals work and more. Communicating these policies up front to employees when they start employment eliminates any confusion or later resentment when concerns are raised. Researching benefits offered by other companies in your industry or by competitors can also help you gauge whether your policy is adequate or needs to be expanded.

Conclusion

Your PTO policy, whether unlimited or not, can be successful. It comes down to your company, the work that needs to be accomplished and the culture you wish to foster. Whether unlimited suits the needs of your business and its employees, or if a limited policy better accommodates your workforce and your company’s service to customers is up to you.