The advent and popularity of unlimited paid time off (PTO) is continuing to grow. Even before the pandemic, some industry leaders started implementing unlimited PTO and flexible work structures that allowed employees to take time as needed, so long as it didn’t interrupt with their ability to meet deadlines and finish tasks.
So what is unlimited PTO and how does unlimited PTO work? An unlimited PTO policy doesn’t place a hard cap on how many paid vacation days an employee can take a year. It’s a contractual agreement that states that employees, upon request, are not limited to vacation time as long as the time off doesn’t interfere with their tasks.
Unlimited PTO, especially in the post-pandemic era of hybrid and remote work, continues to grow and gain popularity globally. Below we’ll get into how unlimited PTO works and if an unlimited vacation policy makes sense for your organization to adopt.
Traditional PTO structure
In a traditional PTO structure, employers will grant their employees a hard cap and paid time off. They might have 25 days off a year, with 10 of those being vacation days, 5 sick days, and the rest dedicated to paid holidays.
While unlimited PTO is growing, traditional PTO structures do have their benefits. Traditional PTO structures provide certainty to both employers and employees, so employees know exactly what they can expect from a work year and plan accordingly.
They’re also much easier to manage. Most companies with unlimited PTO have to approve every request and determine, based on the needs of the business, whether or not it’s an appropriate time for an employee to take a day off. Additionally, you can expect absenteeism rates to drop with limited PTO structures.
What we’re learning, however, is that flexibility can be profitable. Employees with unlimited PTO structures are happier and more satisfied with their work, which leads to improved company culture, performance, and retention rates. On top of that, workers are more efficient. They are less likely to slack off during busy weeks or seasons.
Another disadvantage to traditional PTO structures is that PTO doesn’t distinguish between sick days and vacation days, so employees might end up hoarding their sick days in order to receive a payout for those sick days to roll over for vacation into the next year.
If you’re considering an unlimited paid time off policy, we’re going to break down the pros, cons, and why unlimited PTO fits the modern workforce.
Vacation views of the modern workforce
Especially in light of the pandemic, employees and employers are seeing the benefits of flexibility in the workplace. Employees don’t want to have to unnecessarily sit around the office when there isn’t much work to be done. They would rather immerse themselves in their work when necessary and take time off when they can.
Employees want more flexibility when it comes to both work hours and vacation time. This MetLife study showed responses from more than 2,500 workers and found that 72% of workers showed interest in working under an unlimited PTO policy.
Studies, reports, and growing trends continue to show that employees want greater attention to work-life balance. Gallup's State of the American Workplace report showed that more than 50% highly valued a job that improved work-life balance, and a Glassdoor study showed that employees value workplace benefits over additional income at a rate of 80%.
The trends are pretty clear; employees want to improve their quality of life and their overall wellbeing. Unlimited PTO could be a great tool for meeting that need.
Pros and cons of unlimited PTO
As with any significant policy shift, unlimited PTO policies come with their own unique pros and cons. We’re going to break down some of the biggest pros and cons to help you get a better idea of whether unlimited PTO makes sense for your business or not.
- One of the biggest reasons to integrate unlimited PTO is your potential to attract and retain top talent. We know that employees value competitive benefits over income, and an unlimited PTO policy will be an attractive incentive for quality hires.
- Unlimited PTO will improve employee satisfaction and happiness. Not only will they enjoy the freedom of taking time off when needed, you will instill a sense of mutual trust and respect with your employee, which will improve workplace and corporate culture and morale.
- Unlimited PTO can actually save you and your company both time and money. Unlimited PTO means employees don’t receive accrued vacation time that rolls over into the next year, and it means that HR teams don’t need to monitor and track all the time off an employee takes. Additionally, though it might seem ironic, employees end up not hoarding sick and vacation time, using the time off only when they need it and only when it fits the business needs. This leads to time off being taken more efficiently and productivity partners being more consistent.
Unlimited PTO cons
- One of the benefits of unlimited PTO, instilling trust in employees, is also a weakness. Because it takes trust in your employees to only take time off when needed or when it makes sense for the business, that opens the door for the possibility that employees will take advantage of the policy. This, simply put, requires trust with the hope that trust is reciprocated and, over time, improves the employer-employee relationship.
- Another unexpected finding is that, in some cases, employees have been seen to take less time off than in traditional PTO policies, mostly due to not feeling pressured to take vacation time before they year's end. This can unintendedly lead to burnout in employees, which leads to impaired performance and employee dissatisfaction.
- Vacation is no longer seen as a reward, especially for long-term employees. Senior staff who have been in the company longer may have accrued vacation time over the years. Their efforts have been rewarded with a high income and competitive benefits, like extra time off. Unlimited PTO, obviously, removes the incentive of additional time off by providing everyone equal unlimited PTO, which can brew resentment and lower satisfaction among senior employees.
Grokker can add to your benefits
Employees benefits don’t need to stop with unlimited PTO. As more employees head back home for the remote and hybrid work settings, they can appreciate the resources, videos, and digital features of an all-in-one digital wellbeing platform, like Grokker.
WIth Grokker, your employees can stay on top of their fitness goals, diet and nutrition goals, mental health, and financial wellbeing anytime, anywhere.
Click here to learn more about how Grokker can help your employees today.