Some time ago the startup world began utilizing “unlimited” or “take what you need” PTO policies as a perk to help recruit the engineers and developers that were being actively courted by all the major tech companies, and now the ripple effect is starting effect the rest of the business world as well. So what are the benefits of offering this to your employees? What are the drawbacks? Should you institute this policy with your employees?


From Forbes: “A recent survey conducted by Harris Interactive of over 2,500 adults working in major U.S. cities found that 57% of salaried workers don’t take all of their allotted time off. Cooper finds this particularly troubling as Americans get less vacation time than most other nations. Employers in France, Italy, Germany and Brazil are required to provide workers 35 to 40 days off a year, but the U.S. has no minimum and companies provide an average of just two weeks.


Yet, ironically, the more you work, the less you get done. According to Cooper, research shows that if you consistently work more than 40 hours a week and don’t take vacation, you become ill, your family is negatively impacted and your productivity goes down.”


An unlimited PTO policy varies from organization to organization, but it essentially allows workers to take as much time as they want off, without needing approval from a manager. This includes everything from sick days, to time off for doctor’s appointments or a child’s spelling-bee, to long term vacations. Some companies don’t track the time off, some do.


The Pros:


  • This is one of your cheapest recruiting tools. This is an extremely attractive draw for someone in the job market, and you can increase the level of talent you get without increasing salary or purchasing other benefits. Not only does it make you more competitive in hiring top talent, it also saves your company money on paying out unused vacation days. An employee leaving a company, either by their choice or yours, is entitled to a pay-out of a certain amount of the PTO days accrued during their tenure. This creates a large expense that can sometimes also coincide with unemployment payments in certain circumstances. It can be an accounting nightmare. If there is no amount of days owed to an employee, there is no amount of of PTO to be paid when they exit your employ.


  • If you have hired the right staff of hardworking, trustworthy employees, this is a huge boon to moral and the feeling of empowerment within the company. The amount of trust implicit in allowing an employees to decide when they will leave and for how long can trickle into other aspects of the loyalty felt and work put in by your staff. In turn, the trust in your staff to make educated decisions lead them to plan very carefully around their workload and deadlines in order to take time off when it is easiest for them with least impact to their work. “There really isn’t a lot of abuse in these plans,” said Bruce Elliott, manager of compensation and benefits at the Society for Human Resource Management (SHRM). “They work really well in high-performance organizations.” Additionally, the vast majority of employees know what will be good for their career and what will not.


(If you haven’t hired a trustworthy, high-performing staff you would trust with this, you need to take another look at your hiring practices.)


  • This policy can make your employees into even higher-performers. Countless studies have shown that the more you work, the less productive you become. Asking employees to work extremely hard, to put in the maximum, to stay as long as it takes to get the work done is necessary for most companies to get the most out of their workforce, but this can lead to burnout, turnover, or highly-stressed and less productive staff. The ability to take a long weekend every month, or to take an extra-long family vacation, will give staff the knowledge that there can be an end in sight, and also allows them the freedom to recharge when and how they need to. This is vital to productivity.


The Cons:


  • The marketplace is competitive and workers are constantly trying to get ahead. This CNBC post from 2014 talks about unused vacation days at a 40-year high. Employees are turning themselves into workaholics who keep going and going… until they collapse or burn out. While the dedication to the job and the work is great, it also means you get less productivity and sometimes higher turnover. With no system of tracking days off in place, it is hard for managers to keep track of who needs to be forced into a break. Even with traditional PTO workers are having a harder and harder time “unplugging” from the job, and the blurred lines that unlimited days off can lead to might mean employees working from home, never taking time off, and never really using the break they need. There is also the risk of being afraid to take time off, with no guidelines and rules in place, how much is too much? What is the line that will get them in trouble? Obviously, no one is going to leave for 8 months and expect their position to be unfilled and awaiting their return, but without communication of expectations it can be hard for employees to judge, which may make them afraid to take any time off at all.


  • Fear of consequences isn’t just on the employees side, it also falls into a con on the company side. How do you implement fairly? Where do you fit in the discussion of responsibilities being covered while employees are away if there is no official request-off conversation? How much time can employees take off before you can take action against them if you tell them it is “unlimited”? This often comes down to language in the culture and the policies about the output of the employee and the relationship between the employee and the manager. The lines of communication need to be open. What if there is a negative relationship between the manager and the employee, and the manager punishes the employee for taking “too much time off” when there is no defined amount of time off? If you track time off, employees can feel scrutinized. If you do not track time off, things can slip through the cracks, and how do you manage that balance?


  • Not all positions can accommodate large amounts of time off. Sales, call-centers, companies with hourly workers, and production or manufacturing facilities would all be losing the main source of revenue when staff goes on vacation for too long or over too many days spread out throughout the year. While the positions can be high-stress and need vacation, it may cost the company too much money to have them gone longer than a set amount of days. It can also be much more difficult to manage allotting time off to avoid overlap with many employees on vacation simultaneously. For example, tech support is often busier around the holidays, when people are using new gifts for the first time and need help with set-up and use. But the holidays are a popular time to take off so staff can be with their families. How do you manage having the coverage and staff in-house necessary to keep up with the demand?


In asking yourself if you should implement these changes into your company, these tips can help guide you. I also recommend checking out this post titled “Could Unlimited Vacation Time Work for Your Company on The Muse as well.