HR’s Guide to Unlimited PTO: Pros, Cons and Best Practices

In the past, it was commonplace for employers to give workers a set amount of vacation days that typically increased with tenure. However, the past few years have seen a lot of changes in the workplace, from remote work to flexible scheduling, and paid time off (PTO) is not exempt from the changes. 

Now, some employers are offering unlimited PTO, which gives employees an unlimited amount of PTO throughout the year rather than a set number, giving employees the freedom to take time off when they need it.

Here’s everything you need to know about unlimited time off to determine whether it’s right for your company.

How unlimited PTO works

Unlimited PTO doesn’t mean that employees can take off work with no notice. The process works largely like any other PTO policy, and employees must still submit a PTO request ahead of time to ensure it doesn’t interfere with important duties.

The main difference with unlimited time off is that there is no cap on the number of PTO days an employee can take. There are, however, some unspoken guidelines, such as the amount of time taken off is reasonable and does not affect their work. Many companies also require the leave to be signed off by a manager or for leave to be staggered between colleagues. 

Companies may implement an unlimited PTO policy for a variety of reasons. Still, most reasons have to do with improving employee wellness or attracting and retaining top talent. Many companies have already implemented unlimited PTO:

• Zoom offers unlimited vacation days with a “My Time Off” policy
• Netflix has offered unlimited PTO since 2003, and
• Evernote gives employees an annual vacation stipend in addition to unlimited PTO.

Pros and cons for employees

Although unlimited time off sounds like a dream, it doesn’t come without pitfalls. There are some pros and cons for employees.

Pros and cons for employers

Unlimited PTO can have serious benefits for employers, as well as risks. 

Pro: Attracts and retains talent. Unlimited PTO is a sought-after benefit, and amid a tight labor market and economic uncertainty, top-notch benefits can attract talent and boost retention.

Con: Risk of policy abuse. “Employees may take off more time and, in some cases, may take off excessive time. Also in this vein, it [can] be hard to discipline employees for taking off too much time if their time off is ‘unlimited,’” says John Viola, employment law attorney at Thompson Coburn.

Pro: Boosts employee morale. “Unlimited PTO may help boost morale and promote a trusting workplace environment,” says Viola. Employees who have the freedom to take time off when they need it to reset and recharge often come back ready to hit the ground running, do better work and have increased productivity.

Con: Causes conflict among employees. Unlimited time off can cause tension between colleagues if one employee is taking a much larger amount of leave than colleagues, and lead to resentment and conflict.

Pro: Saves HR time and effort. Getting rid of a limited PTO policy can help to eliminate administrative tasks for the HR department such as tracking PTO days and accruals. 

Con: Potential for legal concerns. Unlimited PTO can clash with other types of leave, according to Viola. “If an employee takes a six-month military leave of absence, [they] may claim [they are] entitled to receive pay during that entire period. Employers must handle such absences consistently and in a nondiscriminatory way,” advises Viola.

How to tell if unlimited PTO will work for your business

Unlimited PTO isn’t one-size-fits-all, and there’s a chance it may not work at all for your business. Before deciding if an unlimited time off policy is a feasible benefit for your company, consider:

• Business type: It’s important to take the type of business you’re in into consideration. Can it sustain an unlimited PTO policy without sacrificing business needs? What guidelines would you need to set in place to maximize efficiency?
• Employee needs: Even though it sounds good on paper, unlimited PTO isn’t always the best option for your employees. It’s important to consider the demographics and needs of your workers to see if they’d benefit from unlimited time off or some other PTO policy.
• Company culture: Unlimited PTO relies on trust between employees and employers. A culture of employees not trusting their managers, or vice versa, can mean that unlimited PTO can be misused, abused or not used at all. Before you implement a new policy, assess your current company culture to make sure it’s a suitable fit.

Transitioning to an unlimited PTO policy: 3 best practices

If you think your company could benefit from an unlimited PTO policy, you may be ready to start implementing a trial run to see how it works. Here are a few best practices to create a smooth transition to a new PTO policy:

• Specify what is and isn’t allowed within the policy and update the handbook with clear guidelines
• Provide education to employees that answers frequently asked questions and guides employees through the new policy, and
• Use a master calendar to help teams stay on track and coordinate leave to ensure work needs are fulfilled.