How Does Unlimited PTO Work? Plus Pros And Cons
Most of us dream of more free time to relax or travel or spend time with loved ones. Unlimited PTO (paid time off) is a policy that allows employees to take as much time off as they need, without a set number of days allotted per year.
Sounds too good to be true? Maybe. Here I’ll explore how unlimited PTO works as well as the pros, cons, and best practices.
How Does Unlimited PTO Work?
Unlimited PTO allows employees to take as much time off as they need, without a fixed number of days. Here’s how it typically works:
1. No set time limits
Employees are not assigned a set number of vacation or personal days. They can request time off as often as they want, as long as their work responsibilities are met.
2. Approval process
Even with unlimited PTO, employees generally need approval from their manager before taking time off. This ensures that the time away won’t negatively affect the team or company operations.
3. No accrual of days
Since there are no limits, employees don't accrue vacation days over time. This means there's no need to track the number of days an employee has earned, and there’s no payout for unused days if they leave the company.
4. Focus on results
Unlimited PTO policies are based on trust and performance. As long as people are meeting their goals and contributing to the company’s success, they’re free to take time off as needed.
How To Use Unlimited PTO
Unlimited PTO is a new concept for most people, so how do you navigate these unchartered waters?
Understand your company’s policy
Each company, and probably team, will have its own written and unwritten rules for implementing unlimited PTO, so it’s essential to familiarize yourself with the specific rules and processes for requesting leave to stay in good standing.
Request, don’t demand
Although you can take time off as your workload permits, remember to frame your PTO as a request rather than a demand.
Unexpected situations may arise, and showing respect for your team’s needs fosters a cooperative work environment.
You can probably request time off in advance using your org’s HR software or HR software for small businesses.
Stay flexible
If unexpected work arises or multiple employees request time off during the same period, consider adjusting your PTO to minimize disruption. Flexibility helps maintain smooth operations while still allowing you to take your time off later.
Disconnect during time off
Unlimited PTO may take some getting used to, but once you’ve ensured your tasks are completed or covered, enjoy your time off without worrying about work. Trust that the company can function smoothly in your absence.
As we’ll go into, effective unlimited PTO is born from good management and leaders practicing what they preach!
Unlimited PTO: Pros And Cons
Pro: It’s a great recruiting tool
- Attractive benefit: Unlimited PTO can be viewed as a desirable benefit, especially in competitive job markets. It signals trust and flexibility, which is appealing to top talent, particularly in industries where work-life balance is highly valued.
- Differentiator: Offering unlimited PTO as a fringe benefit helps a company stand out from others that provide a set number of days, making it a useful recruiting strategy to attract quality candidates.
Pro: It can contribute to employee wellbeing
- Improved work-life balance: Unlimited PTO allows people to take time off when they need it, whether for personal obligations, vacations, or just to recharge. This flexibility helps them better balance work with personal and family life, reducing stress and improving overall life satisfaction.
- Prevent burnout: With no strict limitations on time off, people can take breaks to deal with life, manage stress, and prevent burnout, which can improve their well-being. Taking time off for self-care, vacations, or hobbies helps people recharge, enhancing productivity and creativity when they return to work.
- Fosters trust: Unlimited PTO signals to employees that the company trusts them to manage their work and personal time responsibly. This can boost morale and motivation, as employees feel empowered to take control of their time and productivity.
Pro: Supports long-term retention
- Valuable perk: People value this benefit and it will contribute to their decision to remain at the organization, rather than go somewhere less flexible in this regard, improving employee retention.
Pro: Simplifies leave policies
- Combines different types of leave: In many companies, employees have separate buckets for vacation, sick leave, and personal days. With unlimited PTO, all types of leave can be merged into one flexible policy, simplifying leave management and eliminating the need to distinguish between various types of time off.
- No year-end rush: In traditional PTO systems, employees often scramble to use their remaining vacation days before they expire at the end of the year. Unlimited PTO eliminates this issue, making planning for time off smoother and more organic.
Con: Uncertainty about usage
- Lack of clarity: With no limitations, people may feel unsure about how much time off is appropriate, leading them to hesitate to take time off out of the fear that "too much" might negatively impact their job security or reputation.
- Fear of judgment: Similarly, people might worry that taking extended or frequent time off could lead to being perceived as less dedicated compared to peers, resulting in people taking less time off than they would under a traditional PTO policy.
Con: Not truly "unlimited"
- Manager discretion: Time off is often still subject to approval, meaning that even though PTO is "unlimited," people may not always feel free to take it when they want or for as long as they want. High workloads or critical project deadlines might mean time off is delayed or denied.
- Implicit limits: In some cases, even though PTO is described as unlimited, employees may be discouraged (directly or indirectly) from taking more than a certain amount. Companies might informally expect employees to stick to a limit, making it less "unlimited" in practice.
Con: Potential for abuse
- Excessive time off: While the vast majority of employees are responsible, there’s a risk that some may take advantage of the system and take more time off than is reasonable, impacting overall productivity. This can also create resentment among peers and lead to conflicts.
Unlimited PTO Case Study: Netflix
Netflix is a company famous for its perks and benefits, including its unlimited PTO policy, actually called the “No vacation policy.”
In Netflix’s words:
“Our vacation policy is “take vacation” and we actually do. Frankly, we intermix work and personal time quite a bit. Time away works differently at Netflix. We don’t have a prescribed 9-to-5 workday, so we don’t have prescribed time off policies for salaried employees, either. We 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.”
The company intro’d the policy because they already had a flexible working policy and wanted to extend it to vacation too.
In his book “No Rule Rules”, founder and then CEO Reed Hastings describes getting nightmares when he first introduced this policy, for example walking into a completely empty office building.
Luckily, most of these were unfounded and the policy has been successful.
Some initial issues were accountants taking time off during traditional crunch periods causing them to close their books late. Another was a member of the marketing team not taking time off for four years(!) because their team was workaholics and they didn't want to appear less dedicated.
But these mistakes were learned from and Netflix is one of the most successful and desirable employers in the world.
From Reddit:
“I took more vacation there [Netflix] than I’d ever taken in my life. They encourage it. The C levels make sure you know that they are taking vacations and you should too. Also most folks who work there are older and have kids and families so they understand.
Netflix has legit unlimited PTO and if you’re a great performer you could probably pull off eight weeks (just not all in a row).”
Sounds pretty sweet! So what can we learn from Netflix and other organizations’ experiences?
PTO Best Practices
Interested in implementing unlimited PTO in your organization? Here are some best practices:
1. Establish clear expectations
- Set general guidelines: Although the policy is “unlimited,” it’s essential to set clear expectations about how much time off is reasonable. For example, some companies suggest a minimum number of weeks per year to ensure employees take adequate breaks and/or have a limit on consecutive holidays. Tech company Evernote uses a $1,000 vacation stipend to encourage people to take vacation.
- Ensure business continuity: Encourage employees to plan time off in a way that doesn’t disrupt work, particularly around deadlines or busy periods. Clear communication is essential to avoid conflicts or gaps in coverage.
2. Model behaviors
- Lead by example: Senior leadership should actively take advantage of the policy and encourage and recognize employees for doing the same. This demonstrates that it’s truly acceptable to take time off.
- Promote open communication: Foster an environment where employees feel comfortable discussing their workload and time off with their managers. Managers should check in with employees to ensure they’re managing their workload and personal time appropriately.
4. Train managers to support work-life balance
- Empower managers: Train managers to balance workload distribution while encouraging time off. They should have visibility into their team's schedules, making it easier to approve PTO requests without compromising business needs.
- Monitor workload and burnout: Equip managers to recognize signs of burnout and encourage their team members to take time off when needed. Managers should track not only productivity but also ensure that their employees are regularly resting and avoiding overwork.
5. Track PTO usage (softly)
- Track trends without strict limits: Although PTO is unlimited, using leave management software to track how much time employees are taking off can help identify patterns, such as employees who aren’t taking enough rest or those who might be overusing the policy. This doesn’t mean imposing restrictions but ensuring well-being and fairness across the organization.
- Review employee feedback: Regularly gather feedback from employees about their experiences with unlimited PTO. Understanding any concerns or discomfort about using the policy can help refine its implementation.
6. Create PTO-friendly periods
- Encourage PTO during downtime: Identify slow periods in the business calendar and encourage employees to take advantage of them for time off. This minimizes the impact on productivity and ensures employees take breaks during less critical times. For example, our parent company BWZ mandates employees take Fridays off in August.
- Avoid peak times: Set reasonable restrictions on taking time off during high-demand periods. Be transparent about blackout periods, such as during critical project deadlines or holiday rushes.
7. Foster a results-oriented culture
- Focus on deliverables, not hours worked: Make sure performance evaluations are based on results rather than hours spent at work. This shift ensures employees don’t feel they need to “prove” their commitment by being present all the time.
- Celebrate achievements, not overworking: Recognize employees for completing tasks and meeting goals, rather than glorifying long hours or constant availability. This encourages a healthier work culture where time off is valued.
8. Offer further wellness support
- Promote mental health days: Encourage employees to take time off when they feel mentally exhausted, even if they don’t need a full vacation. A well-rested employee is more productive and engaged in the long run.
- Provide wellness programs: Complement the unlimited PTO policy with wellness initiatives such as mental health days, gym memberships, or access to counseling services. This further emphasizes the company’s commitment to employee well-being.
7 Common Types Of PTO
As well as unlimited PTO, here are some other PTO types to be aware of:
- Discretionary PTO: Time off granted at the discretion of management, typically based on individual performance or specific needs.
- Floating Holidays: Flexible holidays that employees can take at their discretion, typically used for personal or cultural events not covered by standard holidays.
- Flexible Time Off: A time off policy where employees have flexibility in choosing when to take vacation or personal days, without rigid limitations.
- FTO vs PTO: FTO (Flexible Time Off) typically offers more freedom with fewer restrictions compared to traditional PTO (Paid Time Off), where a set number of days are allocated.
- Paid Holidays: Designated public or company-recognized holidays during which employees receive paid time off without needing to use vacation days.
- Sick Days: Specific days set aside for employees to take time off when they are ill or need medical care, usually paid.
- Unlimited PTO: A policy allowing employees to take as much time off as needed without a set limit, as long as work responsibilities are met.
Editor’s Take: Should You Implement Unlimited PTO?
So, is it worth adding unlimited PTO to your employee benefits strategy?
From my research, most people with the “unlimited” PTO option seem to take around 5-6 weeks per year, so maybe just offering 6-8 weeks of flexible vacation will suffice.
This is generous in the modern world and removes any needless ambiguity for both parties.
If you decide it suits your culture to go for the unlimited option, some companies choose to brand it ‘reasonable’ time off instead to add some guardrails, and be sure to apply the best practices above!
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