Defined: The Pros and Cons of Unlimited PTO
PTO remains a top priority for both employees and job candidates. Eager to retain current teammates and to attract potential new hires, many employers have started to offer unlimited PTO plans. What does HR need to know about this time off policy, and what should it consider when deciding to implement a new PTO benefit?
What is Unlimited PTO?
As the name suggests, unlimited PTO plans are structured so that employees decide when to take PTO and how to use PTO. The employer provides little-to-no parameters in this type of plan—as long as tasks are accomplished as expected and the organization does not suffer negative repercussions.
However, there typically is a limit to unlimited time off. For example, employees can't reasonably expect to take off half the year—this would be an abuse of the policy. The parameters for an organization's unlimited PTO benefit should be laid out in its employee handbook or Culture Guide.
Notable companies that offer this policy include:
- Virgin Group
- General Electric
Unlimited PTO Pros
1. Employee Trust Increases Work Performance: According to the Society for Human Resource Management (SHRM), implementing an unlimited paid time off plan, "can lead to a more engaged workforce because management is trusting employees to manage their own time in a way that serves their personal needs while still getting the work done."
Similarly, a study published by the Journal of Economic Behavior and Organization reports a positive relationship between employee trust and workplace performance. When employers allow employees to self-manage, employers communicate that they trust the employee. With that trust, the employee is more likely to feel a greater responsibility over the outcome—especially if the outcome directly impacts that individual''s personal well-being.
2. No End-of-Year PTO Rush: It's the end of the year and employees have extra PTO days accrued. Because nobody wants to lose PTO days, everyone takes off time at the end of the year. For an employer, this means an understaffed office and lost productivity. Unlimited PTO prevents this concern.
Employers can mitigate this problem with an unlimited PTO plan by removing the "use it or lose it" mentality.
Unlimited PTO Cons
1. Employees May Take Advantage of PTO: As an employer, the phrase, "no rules" probably makes you more than a little apprehensive. By relinquishing control over PTO, you are trusting that employees won't take advantage of their freedom—a real possibility.
2. Increased Need for Administrative Communication: Employers should also be aware that unlimited PTO doesn't necessarily eliminate management. In fact, for unlimited PTO to work, a solid communication structure must be put in place. Without explicit communication of performance expectations, employees are left to interpret expectations which can cause conflict on multiple fronts.
3. Difficult Implementation: Employees may not like switching to an unlimited policy, especially if they've already accrued PTO days during their tenure with the organization. It's essential for HR to deliver clear communication that details the change, how it impacts teammates, when it will begin, and even anticipated FAQs.
What to Consider When Deciding on a New PTO Policy
The success of an unlimited PTO plan depends on the unique culture and identity of an organization. When deciding on a policy for your organization, take into account factors such as:
- Current employee trust level
- Employee ability to complete work remotely
- Overall ability of employees to self-manage PTO
- Alternative measures of accountability
Consider conducting a PTO audit to consider your company's financial health and the benefits package it offers. HR may find that an unlimited time off benefit saves money and improves retention.
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