As work life balance and employee wellbeing become more of a priority in today’s workplace, traditional paid time off (PTO) as we know it is changing. Enter unlimited paid time off (PTO), where the typical leave model of accrued vacation days shifts to giving employees the freedom to take time off whenever needed, subject to discretion.
The flexibility and trust required for a successful unlimited PTO policy may sound mind-boggling, but it’s doable.
Before we set out on this leap of faith, let’s first explore the ins and outs of unlimited annual leave, its benefits and challenges, as well as any other considerations we’ll need in implementing this leave policy.
What is unlimited paid time off (PTO)?
Unlimited paid time off (PTO) is exactly what you’d think: it’s a leave policy that lets employees take as much time off as they like, covering parental leave, vacation time, mental health days, sick days, compassionate leave and more.
In theory, this means that the employee can take off work as long as their work is completed. In practice though, they still have to comply with company rules regulating PTO and coordinate with colleagues in order to ensure that their absence doesn’t interfere with their work.
Why are businesses today offering unlimited PTO?
Paid time off with no limits may seem intimidating due to its complexity, but it’s growing in popularity among employers and employees alike. This may be a no-brainer, but taking time off improves employee wellbeing, reduces stress levels and increases productivity.
Employees that are healthy and happy also do better at meeting work requirements, experience more job satisfaction, and stay on longer at their roles. All these benefit employers by boosting their reputation and encouraging a positive work culture, helping them attract and retain top talent.
Two companies with an unlimited holiday policy
Now that we know what unlimited paid time off (PTO) policies entail, it’s time to find out how they work in real life.
Netflix
Well known for their disruption of traditional HR policies, Netflix has been in the unlimited PTO game since 2003. Back then, Netflix’s co-CEO Reed Hastings noticed that they didn’t track hours or days worked – why should they track vacation days, then?
At Netflix, salaried employees have the autonomy to decide when they want to work according to their “No Vacation Policy”. While it came with some hiccups, like employees scheduling time off to avoid crunch periods or colleagues doubling down on work hours due to workaholism, they eventually made it right by communicating expectations to guide leave-related decisions.
With a stellar personalised benefits package featuring additional perks like massages, personal trainers, house cleaning and tax preparation, LinkedIn sets the employee experience bar even higher with their unlimited PTO policy for salaried employees.
While paid time off is not paid out when staff members leave, they encourage taking time off by instantly offering unlimited holidays from the get go, as long as employees work it out with their managers – no accrual required.
They also have two fully paid shutdown weeks: one during summer and one at the end of the year, as well as InDay, a Friday off every month where employees get to focus on themselves.
Benefits and advantages of implementing unlimited PTO
We touched on the pros of implementing unlimited paid time off (PTO) earlier, but let’s get into the details here.
Boosts employee productivity
Done right, an unlimited holiday policy leads to a shift in mindset that makes it easier for employees to stay focused and manage time: if the work is finished early, they can end their day earlier as well. This eliminates the need to count hours and days worked, since the target metrics used are the quality and quantity of work done.
Employees who feel secure in their work and comfortable taking leave tend to enjoy their time off more – being able to fully relax and relieve stress during vacation means that they come back rested and ready to do efficient, effective work.
Attracts and retains talent
As an employer, you put your organisation in the capable hands of your employees – naturally, employees also look out for signs that show that a company trusts them to do their best work.
An unlimited PTO policy helps show employees that your business values independence, freedom and flexibility at work, which is valuable to potential employees avoiding red flags like micromanagement and lack of time off. Unlimited PTO also reduces the need to discuss PTO balances during the recruitment process, removing barriers to hiring the best talent you can find.
From an employee perspective, unlimited annual leave is a rewards system that shows how an organisation prioritises the human aspect of work and empowers employees to make decisions on how to best use their time. This makes them feel valued, making it more likely that they stick around.
Reduces administrative load
Unlimited paid time off helps your employees, managers and HR department by managing the administrative load required to keep track of employee time off.
Not only does this reduce the number of hours spent handling employee leave, but it also encourages flexibility and adaptability by allowing for adjustments during the peaks and troughs of the business year.
Common challenges in implementing unlimited PTO
Unlimited PTO may sound like a dream, but it does come with its drawbacks.
Employees take less time off instead
This may seem counterintuitive – you’d think an unlimited holiday system would result in more time off taken, but employees actually sometimes take fewer days off when they work at organisations with this policy. Due to unlimited PTO’s ambiguity, some employees may feel uncomfortable taking time off because they don’t feel empowered to say that their work is done.
Without clear guidelines on holiday entitlement, employees might be afraid to take too many days off since they don’t know how much is too much. Pair this with hustle culture or management that encourages overworking, and the intentions behind unlimited days off are rendered moot.
Possible friction between coworkers
Unlimited time off may encourage more flexibility in terms of when to take a personal day, but that also means that employees may find that their colleagues are more likely to be unavailable when needed, hindering their work progress if they need to collaborate.
This can lead to tension and resentment between employees, especially if it feels like one or more coworkers are taking excessive time off and adding to the workload for those who aren’t. Left unchecked, the strained relationships between colleagues can lead to poor performance, distrust and decreased engagement.
Issues with management approval and decision making
Each request for paid time off must be reviewed by an employee’s manager, and that can add to manager workloads – reviewing data to determine whether the PTO request is reasonable, approving or denying the request, managing employee tasks and identifying backup staff if needed all take up bandwidth.
This decision making process can be made even trickier when there is the risk of real or perceived equity issues like favouritism, team culture issues from denied requests and PTO approval retraction from unforeseen emergencies.
How can you address the potential misuse of your unlimited PTO policy?
Unlimited PTO policies are often misunderstood to be blanket permission for employees to come and go as they please – communicating that unlimited PTO isn’t actually completely unlimited is key to managing expectations. In general, they should understand and trust that their PTO requests will be fulfilled so long as the business does not suffer in their absence.
Setting reasonable and transparent boundaries around holiday requests will help employees have more clarity on what constitutes an acceptable PTO request and PTO limits.
Collecting data related to holiday requests will also help prevent policy abuse: employee management software can help track PTO requests and manager approvals, so you can review consistency and equity as your organisation practises its new holiday allowance policy.
Should you offer unlimited holidays to your employees?
We say yes, but with terms and conditions. If your company hires mostly salaried employees, an unlimited holiday policy can be a great way to encourage work life balance and build trust between employees, managers and your organisation.
If your employees are mostly hourly or shift-based, though, you’ll likely have a hard time figuring out how unlimited PTO would work since some employees may prefer accruing PTO hours.
How to implement unlimited PTO into your business
If you’ve decided that unlimited PTO is right for your organisation, here’s how to go about it.
Design an unlimited PTO policy that aligns with your company’s core values
Ironing out key details in your unlimited PTO policy will help reduce ambiguity, giving your organisation the confidence to proceed with the new measures put in place. Find out whether the policy you have in mind will be the right fit for your workforce and company culture – there’s no point in implementing change if your organisation isn’t ready for it.
Communicate policy guidelines to HR, management and employees
Clear communication is the way to go – it’s a big change, and your HR team should be ready to guide everyone through the implementation process by responding to any questions and concerns. Management may require more training if your unlimited PTO policy depends on manager approval.
Track PTO data and gather feedback for policy evaluation and review
Once your policy is up and running, nurture it by checking in with managers and employees. Getting observations and comments from the people involved in a new plan is the best way to find out whether it’s working as intended. You’ll also find out how unlimited PTO works with other leave types like parental leave and sick days within your organisation.
Adjust the unlimited PTO policy to meet organisational needs
Using the data from tracking and evaluating the new policy’s performance, look for areas of improvement and follow up by taking action. This shows your employees that you care about their opinions and you’re invested in their wellbeing, boosting their confidence and trust in your decision making.
Addressing common employee questions about unlimited PTO
We can’t stress this enough – clarity and transparency about your organisation’s unlimited PTO will help employees feel more confident making the most out of the policy.
Here are some key questions to answer as you construct an unlimited PTO policy that works for you:
- What happens to my unused PTO?
- Can I use unlimited PTO for personal, vacation, or sick days?
- Is there a maximum number of days I can take off in a row?
- Do I need approval for time off in advance, or can I take it spontaneously?
- Will taking time off under this policy affect my performance evaluations or promotions?
- How does the unlimited PTO policy affect paid holidays and company shutdowns?
- Are there any blackout periods or busy seasons when taking time off is discouraged?
- How should I communicate my time off plans to my team and colleagues?
- Will the company provide resources or tools to help me manage my time off effectively?
- Does this policy apply to part-time employees or contractors?
There’s a simpler way to manage employee benefits
Unlimited PTO is a great approach to prioritising employee wellbeing, but managing it can be challenging when there are already plenty of other employee benefits to consider.
Enter Employment Hero: an all-in-one employee engagement software that simplifies employee benefits administration, measures employee engagement and tracks policy implementation metrics.
Some of the features on our employee engagement platform include:
- An employee self-service portal where employees can request leave and track leave approvals.
- The Employment Hero mobile app through which employees can manage leave and timesheets or find contact details on the go.
- Custom Surveys where you can create and send surveys to employees to find out whether your organisation’s policies are effective.
- Employee benefits tracking where you can see how benefits are being utilised and better align the benefits offered to your employees’ needs.
Learn more about how we can help with employee engagement strategies and employee benefits administration by booking a demo with our business specialists today.
