Unlimited PTO – How Is It Possible?

by Bethany Wright on March 19, 2018

in Policies

Man and Dog

Paid time off is one of the most important ‘checklist items’ when looking for a job. One of the first questions people will ask their friends when they start a new job is, “How much PTO do you get each year?”

There are many reasons why people care so much about paid time off, but the biggest reason is for better work-life balance. Having a rich PTO benefit can decrease the stress people feel when they need to use it for things they aren’t really thrilled about. For example, you need to take your dog to the vet, but they are only open during typical business hours, 8-5, just like your work. What do you do? Well, you have to dig into your PTO bucket and take that time, even if it isn’t how you would prefer to spend it.

Enter, Unlimited PTO Policies! Doesn’t that sound like the most amazing benefit any company could give to its employees? What could be bad?

There are many reasons why an unlimited paid time off policy is attractive to both employers and employees:

  1. There is no liability on the company’s books for paid time off that hasn’t been taken.
  2. There are no worries that a bunch of employees will request time off at the end of a year so as not to lose their PTO.
  3. It is a great recruitment tool. Unlimited PTO will likely draw in eager applicants to any openings the company may have.
  4. Employees feel like their employer trusts them to manage their own workload and time. Which, in turn, improves retention for the company.
  5. It gives the employees a lot more flexibility in their work schedule when they don’t need to use 2.5 hours of PTO to get that root canal or take their dog to the vet. They can just go, do it, and come back to work. This leads to a decrease in stress for employees as they don’t have to worry about losing their PTO.

However, there is always the flip side of the coin. Some of the things that employers worry about with these sorts of policies are:

  1. Can you realistically discipline or terminate an employee for using PTO if you have a so-called “unlimited” policy?
  2. Employees may be confused by the uncertainty of the policy. If they don’t know how much is allowed, will they use too much, or possibly not enough?
  3. Is it realistic for all of our employees, or just a select group?
  4. Will employees embrace the policy and see it as a true benefit? Or will they see it as more of a takeaway because they won’t have anything to pay out at the end of the employment relationship?
  5. What about protected leaves? In Oregon, especially, you not only have the Family Medical Leave Act and the Oregon Family Leave Act but you also have the Oregon Sick Leave law to think about when implementing a policy like this.
  6. Will longer term employees be angered that those who are new to the company are allowed to take the same amount of PTO they do?

Regardless of the pros and cons of an “unlimited PTO policy,” when you implement a policy like this, there are many things the company should do to ensure employees understand why you are changing the policy, and how they are supposed to utilize it.

  1. First, take a look at your employee history of PTO/Vacation/Sick leave use, and what their patterns of use are. This can help you understand how employees are using their time off in the current structure and if an unlimited policy could be right for your business.
  2. Be ready to modify your expectations from “putting in time” to “overall contribution.” You will need to look at how employees contribute to the success of the business, versus “are they coming in every day from 8 to 5?” Focus on performance rather than time spent at the office and train managers to communicate regularly with their team so that all work is being completed in a timely and appropriate manner.
  3. Find a name for the policy that doesn’t indicate the benefit is actually unlimited. The reality is that it isn’t an unlimited policy, it is a policy that should be used appropriately and within reason, but with a lot of flexibility. Names like Flexible Time Off, Variable Time Off, Open Time Off, or Adaptable Time Off may help employees understand the true nature of the policy; to give them an adaptable schedule that puts them in charge of their time.
  4. Find a way to link your PTO policy with the culture and values of the company. This may help employees better understand how this policy is meant to work.
  5. Set expectations for the standard use of the policy. This will help employees understand what may be seen as under using the benefit, or abusing the benefit.
  6. Include some sort of approval and tracking process for the use of PTO. This makes certain that an entire department isn’t gone at one time and patterns of abuse will be easily recognized.
  7. Clearly define the difference between PTO and protected leaves (FMLA, OFLA, Sick Leave, etc.) so that employees know what will be paid and what won’t. Having those policies specifically separated out from the PTO policy could alleviate some liability for the company when it comes to someone who may not be eligible for protected leave, but may need extended leave for a disability.
  8. Think about employees who currently have accrued PTO/Vacation/Sick on the books and determine what happens with that time. Do you pay it out immediately? Do you take it away? Do you pay it out at termination? Do you put it into some sort of leave bank for protected leave?
  9. Consider if offering unlimited PTO only after a set period of employment is appropriate. For example, employees must work for the company for one year before they’re eligible for unlimited PTO.

Flexible time off policies, when implemented properly, may lead to higher engagement and a reduction in turnover.

However, as with any policy, this kind of time off policy will not work for all businesses. Some employers cannot realistically implement a program like this due to time constraints and the need for certain employees to be onsite at certain times, such as manufacturing companies. In other companies, the company culture may not be a good fit for a policy like this.

Take a look at your own company and the culture there, and see if something like this might work for you. If you are considering it, you could always try it out as a “test” scenario for a year and see what happens. If it doesn’t work, you can always move back to a more traditional paid time off policy.

If you have questions about whether or not a policy like this might work for your business, give us a call and we can help!

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