Making Sure Unlimited PTO Is Done Right
By Lin Grensing-Pophal
March 24, 2022
In an era of high stress, burnout and turnover, it's important for employees to achieve the right balance between work demands and personal pursuits. They need, after all, to recharge once in a while.
That was the original promise of unlimited paid time off (PTO), which does away with a fixed number of vested vacation days each year and instead lets employees take any number of days away from work—after getting approval from their managers to do so. Unlimited PTO now has become a trendy perk that companies use to signal their commitment to work/life flexibility.
At first glance, the promise of unlimited PTO seems too good to be true; too often, that may be the case.
Unlimited PTO "can benefit a performance-based culture," said Jennifer Loftus, founder and CEO of SwingSearch, an Oakland, Calif.-based recruitment agency focused on startups and high-growth companies. Employees who can get their work done and reliably meet their goals "are well-situated to enjoy the perk of unlimited PTO," she said.
But despite the potential benefits, there are definite downsides to unlimited PTO policies in workplaces with certain cultures.
Employees who are paid based on commission may be the most negatively affected. "Compensation structures based on commission can make it particularly hard for people to step away and take time off," Loftus said. "There becomes a financial trade-off to taking time for vacation, and it can become a workaholic's Achilles' heel—not knowing when to stop."
The "herd mentality" also has an impact, Loftus said. "If the majority of the team works 10-hour days and takes very limited vacation, it will be hard to break free from that cultural norm."
Employees themselves may be skeptical of the promise of unlimited PTO, said Anjela Mangrum, president of Mangrum Career Solutions in Cincinnati.
While unlimited PTO is a great concept, she explained, job seekers and employees can see the concept as "a scam" and "assume that they'll have to work harder without getting compensated for vacations they never took."
As a result, they may feel they've been hoodwinked if there's no way they're actually going to be able to take time off and still get their work done.
Reducing Vacation Time
"Studies show that people actually take less vacation time when there is an unlimited PTO policy in place," Loftus said. Too often, "the flexibility that most employers intend to create isn't actually used." In a 2017 study, for example, HR platform Namely found that employees with unlimited vacation plans take an average of only 13 days off per year, whereas traditional-plan employees average 15 days off annually.
Mangrum agreed. "Some workplaces still thrive on the toxic 'hustle' culture, looking down on anyone who asks for a break," she said. "Others simply reject PTO requests or overload employees with work, making it impossible for them to take even the two to four weeks that companies typically offer" under traditional vacation policies.
A solution may be putting guidelines in place to help employees navigate the freedom and flexibility that unlimited PTO policies promise.
Loftus, for instance, recommended having clear parameters when implementing unlimited PTO policies. "Most people still want to understand what the appropriate amount of time off is," she said. "Conflict comes when expectations aren't set appropriately" and employers don't provide clear expectations for taking time off.
Jeff Mains, CEO of Champion Leadership Group in Plano, Texas, agrees. "One of the most significant problems is that there are typically no clear goals as to how much time is suitable for an employee to take," he said. "It's easier for employees to know what they can and cannot do with their time off when it is explicitly stated."
Loftus noted that "a flexible vacation range may be more helpful to employees than an unlimited policy."
Tabor likewise suggested providing employees and managers with an average vacation range, including a minimum expected—or even required—level. "On top of this, make sure your HR team is conducting a regular audit of PTO taken," Tabor recommended. "We run reports quarterly to understand who the outliers are in both extremes and meet with their managers to discuss how to best approach the situation."
Other suggestions for making unlimited PTO work include the following:
Use effective branding. "Thinking about what you name the policy can make a difference," advised Danielle Tabor, SHRM-SCP, chief people officer at fintech firm Emburse in Los Angeles. "We stayed away from calling it 'unlimited' PTO as that is not really what we're trying to do here. We want people to 'take what you need,' in order to be a more balanced and productive colleague."
Get management buy-in. How PTO is perceived starts at the top, Loftus said. Managers can set the stage by proactively asking about vacation. "I make it a point to ask when people are taking vacation, and I try to be mindful of who hasn't let me know they've taken it," she said.
Focus on results, not attendance. Ultimately, measuring employee performance based on their achievements, rather than hours worked, is the key to making unlimited PTO policies successful, Mangrum said. "Managers who are excessively concerned about employee attendance and judge their staff's competence by the amount of overtime they put in often end up with a workforce that feels cheated in the name of limitless days off."