Thinking About An Unlimited PTO Policy?

The trend towards offering employees unlimited time off is growing. This is no longer just a benefit offered by hip tech companies like Netflix and Google. At Insource, we are starting to see unlimited time off policies offered by some of our clients including small start-ups, nonprofits and mid-size companies.

What Is an Unlimited Paid Time off Policy?

An unlimited paid time off (PTO) policy allows employees to take time off on an as-needed basis. This innovative policy has been adopted by companies recognizing that there is an increased focus on the importance of work-life balance. Unlimited PTO means that an employee’s vacation time, sick days, time off for appointments, etc. are rolled into one discretionary plan.

Pros of Unlimited PTO

Looking closer at this movement, employers and employees alike agree that there are compelling reasons for an unlimited time off policy.

Trust

• Unlimited PTO is based around a very simple philosophy: get your work done, be responsible and take time when you need it. Instilling confidence in your employees to manage their time accordingly can send a strong message about trust within the organization.

Recruiting & Retaining Talent

Offering an unlimited time off policy can be seen as a major draw for potential candidates. Having unlimited time off means employees don’t have to worry about “banking” time in the event they are sick or when an unforeseen opportunity or obligation comes up. Allowing employees to maintain control of their time-off goes a long way towards helping staff feel motivated, committed and happy.

Reducing Administrative Overhead

Organizations can also claim a financial benefit by offering unlimited paid time off. Days off under this policy are not accrued. If an employee leaves the company he/she does not need to be paid out for unused but accrued days, as Massachusetts law requires. Companies do not need to carry the accrued expense on their books, making the bottom line look more attractive.

Work-Life Balance

Unlimited paid time off can result in an increase in the overall health of employees and their families. With a flexible policy, employees can take the time off to make a doctor’s appointment or routine dental appointment that they might otherwise put off. The argument has also been made that with an unlimited policy, employees are more likely to stay home when they are ill. Cutting down on the amount of sick employees in the office can help with productivity.

Overall, offering unlimited paid time off seems to be a win-win but it’s important to note that it is not the right fit for every organization. Let’s look at some of the reasons why.

Cons of Unlimited PTO

Finding Balance

• – Some employees at organizations who offer this perk have expressed concern that they do not know the “appropriate” amount of time to take off. Feedback from companies that have implemented this new policy state that they find many employees take, on average, about three to four weeks off. Some employees, left to their own devices, won’t actually take enough, or any in some cases any, time off. This can mean serious burnout. Many workers fear taking too much time off could damage their reputation.

Potential for Abuse

From an employer’s standpoint, it’s important that certain safeguards be put in place so that employees don’t take too much time off in a way that impacts productivity. For example, limiting time off to two back-to-back weeks is often an option seen in policies developed for our clients. In developing these policies there are a number of implementation considerations that can be incorporated to avoid issues later.

Measurement

In addition to the possibility of some employees not taking enough time, employers should note that they can no longer use absences as cause for termination in the same manner as they may have historically. With traditional sick or vacation time policies, there were a specific number of days available for time off so it was easier to identify “too many.” With an unlimited policy the focus needs to be based on other factors including productivity standards and/or perhaps adherence to policy guidelines about requesting time off in advance. Extended illnesses may require documentation beyond a certain number of days out, etc.

Fairness for Long-Term Employees

In an organization that has traditionally offered tiered PTO benefits based on tenure, switching to an unlimited policy can potentially be viewed in a negative light by some employees. It’s important for an organization to consider that a move to unlimited PTO needs to be examined with consideration of the value of the existing PTO policy.

Considering Putting an Unlimited Time off Policy in Place?

Here are some additional items to consider:

• Unlimited time off does not mean untracked time off. Tracking time off means that an employer is approving the time and they can later analyze it for trends. Comparing planned and unplanned time off use is often a useful comparison.
• Train managers to continuously check-in with employees that are not meeting performance expectations. If an employee is taking too much time and the work is suffering, the discussion will need to focus on the work, and of course all of this should be documented.
• Finally, work with HR and legal advisors to develop a clear, fair and legal policy that will accommodate the various types of leave employers have to deal with (for example, FMLA, short and long term disability, parental leave, etc.) and how those will be impacted by an unlimited time off policy.

Long & short

By offering a generous and flexible time-off policy, organizations report increased productivity, lower costs, stronger engagement and increased loyalty. These policies can demonstrate management’s trust in employees and investment in work-life balance. And as we know, happy and engaged employees contribute to happy and productive organizations.

Overall, in order for a flexible time-off policy to be successful, an organization needs to first examine their own culture and determine if it is a good fit. This type of policy is not for everyone. However, unlimited PTO can be a powerful benefit both in terms of recruiting and retaining employees that are happy and healthy.

For more information or questions on implementing an unlimited time off policy at your organization, contact us at insource@insourceservices.com or 781-235-1490.