Is an Unlimited PTO Policy Right for Your Business?

Unlimited PTO may sound crazy. After all, wouldn’t this policy just pay employees to go on vacation and live it up 52 weeks per year?  Not necessarily. Surprisingly, recent trends have shown that some of America’s most well-known companies like Netflix, Dropbox, and Glassdoor are seeing increased productivity and improved employee retention by offering “unlimited” PTO. 

Here’s the nuts and bolts about unlimited PTO.

Pros and Cons of an Unlimited PTO Policy

Not every company, and not every employee will thrive under an unlimited PTO policy.  Therefore, it’s important you consider these pros and cons before you jump the gun and switch your PTO.

Pro # 1: Better Benefits than Competitors and Retaining Employees

In today’s competitive business world, total financial compensation isn’t always king.  If you offer better benefits than your competitor next door, you’re more likely to retain your best employees and spend less time and money training new employees, improving your bottom line.

Con # 1: Employees Taking Too Much, or Too Little PTO

Unlimited PTO doesn’t really mean unlimited PTO. However, some of your employees may think it does. Fortunately, you can put a damper on abuse by letting employees know what’s expected of them and what abusing the policy looks like.

On the contrary, you may have the opposite problem.  Some employees need structure and don’t want to feel like they’re taking advantage of your company so they may not take any time off at all.  This can lead to employee stress and reduced productivity. 

Pro # 2: Less Micromanaging of Employee Hours

Let’s be honest, what’s more important, your employees having X amount of hours worked and Y amount of PTO hours — OR — employees who get their work done and keep your customers happy?  An unlimited PTO policy can help make the actual work, not the hours worked, matter to you and your company leadership.

Con # 2: Expectations Aren’t Always Clear

Does an unlimited PTO policy mean 2 to 3 weeks of PTO, or 6 to 8 weeks?  What about sick time? What if you’re a part time employee? What if project manager Bill only takes 3 days off per year and scares his employees under him from taking more than 3 days?

Be sure to have a dialogue with your HR department, company leadership and managers, and your employees down in the trenches of what is expected of them.

Benefit/Con # 3: Better Productivity… Maybe

If you’ve clearly defined expectations, improved your company’s benefits and culture, and retained your better employees, you’re well on your way to actually increasing productivity.  Or not. If you’ve failed to implement the policy properly or maybe you just have a group of employees that can’t make appropriate use of this policy, it may not be the best bet for you.

Key Points to Keep in Mind

There is no cookie-cutter PTO policy that works for every company.  Consider these factors when customizing your policy.

  • Do you track the PTO hours or trust your employees to not abuse it?
  • Does PTO still require manager approval or do employees have free reign?
  • Are new employees required to work a certain amount of time before being allowed unlimited PTO?
  • How much information do you put in the employee handbook?

Bottom Line

It all comes down to one main point: An unlimited PTO policy isn’t for everyone.  If you trust your employees, already have a good culture, and want to provide a nice incentive, an unlimited PTO policy may be a good option for you. 

However, if you have a lot of part-time or hourly employees, or think it would be difficult to manage your employees use of an unlimited PTO policy, you may want to go a different route.