Unlimited PTO Policy: Pros, Cons, & Implementation Tips

The marketplace of employee benefits transformed as younger generations entered the workforce. While baby boomers appreciate prestigious titles and Millennials value career development and learning opportunities, members of Gen Z say work-life balance is a top priority–including generous time off.

Unlimited paid time off (PTO) is one of the most in-demand employee benefits, especially among tech companies. 72% of workers want the option, and companies like Glassdoor, HubSpot, and Deel already offer the perk to attract and retain top talent. 

But unlimited PTO is not perfect. Many teams take less time off because of office politics and shame from their managers. This guide will help you decide if an unlimited PTO policy is right for your company and understand how to set one up for success.

Does unlimited paid time off really mean unlimited?

No. No business could survive if employees have the option never to show up. In most cases, unlimited PTO means workers can take as much time off as they like as long as they finish their work and maintain strong performance. The specific number of days usually comes down to manager approval. 

A survey by Namely found employees with unlimited PTO policies take an average of 13 days off per year. That’s less than the US average of 15 days under traditional PTO policies.

The success of unlimited PTO hinges on company culture. In companies where managers encourage their employees to take time away from work (and set a good example), unlimited PTO reduces burnout and becomes a valued benefit. In companies where managers make employees feel guilty for requesting a day off, the benefit can backfire and cause stress.

Pros of unlimited vacation

A well-defined unlimited PTO policy can be a core employee benefit in your talent acquisition strategy.

Attract and retain top talent

As we mentioned, unlimited PTO is one of the most desirable employee benefits. It gives employees more flexibility and lets them balance work with traveling, hobbies, and family.

Unlimited PTO can also be an excellent way to convert independent contractors into full-time employees. It demonstrates your company prioritizes flexibility, which many contractors fear they’d give up if they sign an employment contract. 

Create a company culture that helps fight off burnout

Burnout is a serious workplace issue that skyrocketed due to pandemic-related stress in the past few years. More than 80% of millennials confirm they experience burnout at their current company. And 70% believe their employers should work harder to find a solution.

Working more than 40 hours a week can damage physical health and longevity and cause employee burnout. Lack of sleep, a common symptom of burnout, decreases brain function, energy levels, and productivity and even puts you at risk of heart disease and diabetes.

Unlimited time off (paired with a company culture that encourages employees to use it) is a great way to let employees prioritize rest, achieve work-life balance, and fight burnout.

Ditch the scarcity mindset associated with limited PTO

Traditional PTO offers a limited number of days off per year. Employees often avoid taking time in the present because they develop a scarcity mindset. They don’t rest and recharge in the present because they want to maximize the amount of time they have available for emergencies and vacations in the future.

Employees often hoard PTO until the end of the year. This can cause staff shortages, especially if you don’t let employees roll over unused PTO into the following year. 

Reduce accrual and payout costs

Under traditional PTO policies, employers must pay employees for unused PTO at the end of the year or if the employee leaves the company. These costs can significantly drain the company’s budget, especially if they’re unexpected. 

Unlimited PTO side steps these accrual payouts because there is no such thing as “unused” days if employees never had a finite number of days. Avoiding payouts should not be the sole reason to adopt unlimited PTO. The policy will only work if you truly want your employees to take time to rest and recharge.

Boost employee engagement and productivity

A successful unlimited PTO policy doesn’t just reduce burnout. Adequate rest and time away may even boost employee productivity and company profits. 

Kronos CEO, Aron Ain, confirmed in an interview that the year he introduced unlimited time off was one of the best years ever for the business. The employees were as productive as ever, and the company’s turnover rate dropped to a historic low.

Cons of unlimited vacation for employers

Companies that pay their employees hourly wages may not be able to fit an unlimited paid time off policy into their budgets and schedules. There are a few more reasons to be wary of unlimited PTO.

Create a dynamic where employees are afraid of taking time off

Your employees might start taking less time off than they need because they don’t know how many vacation days are. This can become a huge problem especially if managers undermine the unlimited PTO policy with judgment or shame. 

Create a competitive environment and conflicts between employees

An unlimited PTO policy may accidentally create an unhealthy competitive atmosphere at your workplace if your employees start comparing who takes more or less time off.

Some employees may see unlimited PTO as an opportunity to overwork and gain favor over their coworkers. This is especially true for fast-growing startups with hustle culture.

Traditional PTO policies create standard expectations that reduce competition for the most unused vacation days.

Get rid of PTO as a reward

Some companies use PTO as a cost-effective performance bonus or a way to honor employees who have stayed with the company for many years. 

For example, Tessitura Network from Denver offers a paid seven-week sabbatical after every seven years of service. The company claims they want the employees to recharge their batteries and return refreshed. They also incentivize employee retention with the bonus.

However, employees with unlimited PTO have the right to take as much time off as they need by default. Additional vacation days no longer work as an incentive.

How to design and implement an effective unlimited PTO policy

The best way to successfully implement unlimited PTO is to create a crystal-clear policy and make sure managers embody the spirit of unlimited time off.

1. Establish a clear process of requesting time off for your employees

Your company policy should include a clear, step-by-step process to avoid confusion and help managers plan ahead. Employees must know when, where, and how to request days off. They must also understand how the unlimited PTO interacts with sick leave, jury duty, and other types of leave.

The policy should cover:

• The number of days in advance the employee needs to request PTO (to avoid staff shortages)
• The best channel of communication to request PTO (email, Slack, an online form, or human resources software)
• The turnaround time for the manager to respond to the request
• The reason the employee requests time off (this is optional, but may help managers support employees in need)
• Information team members will need while the coworker is away (many companies ask employees to create a coverage doc for more than a couple days away)

Some teams also use a capacity calendar so managers and employees can gauge team departures and see whether time off is possible on any given day.

2. Set a minimum vacation amount

We mentioned that employees sometimes don’t take time off despite unlimited PTO. One solution is to offer unlimited PTO with a minimum number of days of vacation per year.

Also, if hiring global employees, this minimum amount of vacation time cannot be lower than what’s mandatory paid time off in their country.

3. Announce the new PTO policy and organize an AMA

Inform your workforce that you’re introducing an unlimited PTO policy, so everyone is aware of the policy changes.

You can complement the announcement with an AMA event, where your employees can ask an HR leader their unresolved questions about the policy. Convert takeaways from the meeting into an FAQ document that lives alongside your PTO policy in the employee handbook.

4. Lead by example

If you expect your employees to embrace unlimited PTO and take time off to recharge and clear their minds, you need to do the same.

If your CEO and managers work 24/7 (like they often do), you create pressure for your employees to follow suit. And if CEOs and managers answer emails and reply to Slack messages while “out of the office,” your employees may feel like they shouldn’t fully unplug even when they book days off.

In an interview for SHRM, Whitney Hoffman-Bennett, VP of Talent and Culture at CallRail, confirmed that leading by example helped the company overcome the initial challenges of implementing an unlimited PTO policy. “When I took a family vacation,” she says, I used my out-of-office message to say, ‘I'm practicing our value of “turn it off” right now.’”

5. Offer PTO alternatives to cut down on burnout

Sometimes, your employees need to unplug completely. But they often also desire flexibility in their workday. Offering alternatives to vacation time, such as remote work or flexible working hours, can improve work-life balance more than time off.

Additional perks may help further reduce burnout. For example, a health and wellness budget that your workers can use for yoga classes, gym, or counseling can push employees to prioritize health and wellness over hours worked.

Easily manage PTO requests and approval with Roots

Unlimited paid time off can be a tremendous productivity and engagement booster for your team if implemented correctly. Search no more if you’re looking for the best way to set up a streamlined, automated process of requesting and approving PTO in your organization.

Roots is a human resources plugin for Slack, designed to help managers in distributed teams manage and engage their employees.

Among other features, Roots provides PTO request workflows for streamlining the approval process, perfect for fast-paced environments. Roots PTO request automation lets you request and approve PTO without leaving Slack. It tracks vacation history and notifies both managers and employees if employees take too much (or too little) time off. It also reminds teams of upcoming vacation time so everyone can align before time away.

Want to know more? Get started today and learn how to implement Roots into your workflows.