How to Do Unlimited PTO Right
Unlimited PTO has become an increasingly popular benefit offered by employers to stand out in a competitive hiring market. There are many job opportunities available to top talent, and every advantage counts during your organization’s recruiting efforts. The key to offering unlimited PTO, however, is understanding and using it effectively.
To learn more, here’s a guide to avoiding significant pitfalls associated with unlimited PTO, the overall benefits, and how you can effectively administer the policy within your organization.
What is Unlimited PTO?
Unlimited PTO plans are structured so that employees can decide when to take paid time off. In this type of plan, there are no set amount of days that can be taken and the employer provides little-to-no parameters. As long as employees receive manager approval and accomplish their tasks as expected without causing negative repercussions for the team, they can decide how to use PTO.
There typically is a limit, however, to time off. For example, employees can't reasonably expect to take off half of the year—that is an abuse of the policy. An organization's parameters regarding unlimited PTO should be laid out clearly in its employee handbook or Culture Guide.
Why is Underutilized PTO Bad for Business?
Underutilized time-off often stems from a workplace culture that frowns upon too much PTO despite time-off policies. Many employees will use less time off when given an unlimited amount because of this fear. A set number of days feels more intentional, allowing for greater peace of mind. A culture that frowns on its own policies can cause dissatisfaction and resentment amongst employees. Focus on expressing the importance of taking time to ensure employees feel comfortable doing so.
Organizations with commission-based pay may find unlimited PTO especially challenging to administer. When employees feel that being away from the office directly impacts their income, they are less likely to take time off. If employees feel they will never get their work done or lose out on income, the PTO policy may seem more like an empty benefit. This is a problem of offering benefits that are not actually beneficial to employees. Employees in this environment can feel stifled and frustrated. Work to determine a policy that works for your organization.
While an employee may lose out on commissions for a week while on vacation, they will likely feel refreshed and more productive upon returning. If the quality of work suffers it will only hurt business in the long run, so educate employees on the benefits of PTO and the overall importance of time away from work.
How Can You Effectively Implement Unlimited PTO?
Company culture has a lot to do with PTO utilization. In many organizations, employees work more than 8 hours a day with few breaks and little vacation time. If this is the norm, it may feel uncomfortable to take advantage of those unlimited PTO days. Despite being offered as a benefit, organizations may even look down on this practice. The first step to revitalizing your PTO offerings is to understand the overall benefits of PTO and its positive impact on recruiting, retention strategies, and productivity.
Employers should consider their culture and industry before offering unlimited PTO. Offering unlimited PTO to non-exempt employees can be complicated, and lead to potential legal issues as well. Organizations should provide the best policy for their employees and potential candidates that can balance team productivity and employee satisfaction. Vacation utilization can support employee productivity and even creativity.
According to a study by the American Psychological Association, Employees temporarily separate from workplace pressures and decrease stress levels by taking a break from the office. This "stress detox" benefits employees' physical and mental well-being, which increases productivity.
Once you have determined the best policy for you and your employees, be sure it is fully understood.
During the onboarding process, explain what the policy entails, how much is offered, and when it can be used.
Once employees know the policy, remind them regularly that PTO is acceptable and can be used throughout the year. These reminders will also help you avoid issues caused by multiple employees taking time off simultaneously.
Create a workplace where employees feel safe to take the time they need under the proper circumstances. Unlimited PTO can be a fantastic benefit, but it must be correctly implemented so that employees feel comfortable using it and employers can effectively manage it.
How Can a Strong PTO Policy Impact Your Organization?
Strong PTO policies improve your employees' effectiveness and overall retention efforts when used correctly. When employees feel they can safely use PTO when needed and balance their work and vacation effectively, they are more likely to work hard and remain at the organization.
Retention efforts are also positively impacted by solid PTO policies. Employees feel more energized and mentally healthy when given time away from work to refresh their minds and energy. Vacation is necessary for a balanced and productive team, and prolonged periods of diminished morale can lead to high turnover among workers.
Higher turnover means the company is spending more time recruiting candidates while the remaining employees are tasked with picking up the slack—which is both costly and harmful to morale. Ensuring each employee spends time away from the office can combat the strains caused by overwork and burnout.
You can also stay informed, educated, and up-to-date with unlimited PTO and other important topics by using BerniePortal’s comprehensive resources:
BerniePortal Blog—a one-stop-shop for HR industry news
HR Glossary—featuring the most common HR terms, acronyms, and compliance
HR Guides—essential pillars, covering an extensive list of comprehensive HR topics
BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics
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