Over the last couple of years, you’ve heard all about companies offering their employees unlimited vacation or paid-time-off. On the surface, this practice sounds fantastic. Who wouldn’t want to work with for a company that provided such a perk for their people — especially considering that we’re in a burn out epidemic. Have you considered the pros and cons of unlimited vacation?
However, before your startup jumps on this trend, you need to weigh the advantages and disadvantages of an unlimited policy. This way, you can determine if it’s a good fit for your business and employees.
The Pros
Offering your team unlimited PTO shows that you trust them enough that they won’t abuse this generous perk. As a result, this improves morale and builds a more loyal team. Additionally, this encourages ownership and drives motivation through autonomy.
Unlimited vacation encourages ownership and drives motivation.
Studies have found that when employees have more autonomy, they’re more satisfied. To me, this makes sense since you’re essentially allowing them to work when and how they prefer. Working how and where you want is perfect when a team member needs to take a vacation to recharge their batteries or take care of a sick family. Since you’re allowing them to take this time off, they’re going to address their top priorities beforehand.
Unlimited vacation increases employee happiness.
“One of the main reasons companies like Kronos and Netflix decide to implement such flexible benefits is to improve workplace culture and boost employee morale,” writes John Boitnott over on Inc.com. “After all, it’s becoming more important for employees to achieve equilibrium in the different aspects of their lives.”
“The 2017 State of the American Workplace Report from Gallup showed that 53 percent of employees say it’s ‘very important’ to have a job that allows them greater work-life balance and personal well-being,” adds Boitnott. “Unlimited vacation time could help achieve both of these by offering what is still a somewhat unique opportunity in the business landscape.”
Unlimited vacation gives everyone a chance to relax and rejuvenate.
Unlike employees in Europe, there isn’t mandatory time off. Combine that with the fact that we’re working more hours as well, and you can see why most people are headed down Burn Out Street. In turn, this puts everything from our health to workplace productivity in jeopardy.
While taking time off won’t completely resolve this, it’s definitely not going to hurt. After all, going on a vacation replenishes and reenergizes us cognitively. It also boosts creativity, gives us fresh perspectives, reduces stress, and helps improve focus and performance. As if that weren’t enough, taking a break allows us to process ideas, like how to develop an existing product or service.
Unlimited vacation creates a more collaborative culture.
“Unlimited vacation time doesn’t mean unplanned vacation time,” explains the Reflektive team. “Greater flexibility in using PTO means that employees also have to take responsibility for planning and requesting days off, as well as communicating with their managers and team members to ensure that work gets covered.” As a result, this “collective responsibility breeds a more collaborative culture.”
Keep in mind that unlimited vacation is good for your bottom line.
“I’m absolutely sure that it originated in some camps as a way to get a vast amount of vacation time off the books,” says Paula Brantner, senior advisor for Workplace Fairness. “It was something preferred by accountants and others looking at the bottom line. At the same time, some companies adopted it with good intentions, and that believe in the value of taking vacations.”
However, according to the Financial Times, “a big firm that ditches fixed paid leave for open vacations can wipe millions of dollars’ worth of unused leave liabilities from its books that would otherwise be paid to departing employees. At the same time, it can safely offer bottomless holidays, knowing most employees will never take them, especially in the U.S., the only major advanced economy in the world that does not guarantee workers paid vacation time.”
Any perk — such as unlimited vacation — can be used as a recruitment tool.
Employers may not believe that unlimited PTO is essential, but that’s not the case with potential hires. A PTO survey found that 51% of participants accept a job for 10% less pay if unlimited PTO was available.
The Cons
“One of the most obvious potential drawbacks to such a generous policy is the risk that employees will abuse it and take off weeks or even months without the risk of losing their jobs,” writes Boitnott. “No CEO wants to get caught in that type of financial pickle.”
Employees may abuse the policy or suffer from burnout.
However, “research compiled by Sage Business Researcher showed that companies offering unlimited vacation found that in many cases, it encouraged employees to take less time off.” Furthermore, other research has found “that it may even create competition to take fewer days off.” The main reason for this it doesn’t provide much structure since they aren’t sure how many days it is acceptable to take off. As a result, they become burned out, and productivity decreases.
Overlapping vacations.
“Without a system to track vacation requests, too many employees may take a vacation at the same time (such as during school vacations), explains the Glassdoor team. “This can put an undue burden on the remaining employees, or impact project timelines and customer accounts.”
This is especially true if you run a business where teams work in tandems — think production lines or sales organizations as examples. It may be almost impossible to be at peak productive when a good amount of your team aren’t available.
It can create animosity.
“Unlimited PTO can also create resentment and animosity among co-workers,” Taylor Cotterell writes in Forbes. “It opens up the possibility for employees to be irresponsible.” For example, there may be some employees who are taking way too much time off.
I have a friend who has been working a ton of overtime because his co-workers are doing this. And, while he enjoys the extra cash, he’s getting frustrated and exhausted. The reason is that inexperienced managers have a problem with declining time-off requests.
What creates animosity? It also rises when teams are “not effectively scheduled.” Consequently, “there might be too few co-workers to cover for them, leaving team members frazzled and overworked.” Frazzled workers can be a real serious problem during your busier times of the year.
In both situations, this is going to hinder productivity. An overworked team will be too tired to work at peak performance. And, with resentment all over the place, workplace morale will be at a low.
Compliance concerns.
“Employers are obligated to adjust certain production and performance expectations when employees take protected leave under, for example, the Family and Medical Leave Act (FMLA),” writes Jennifer Carsen on HR Drive. All of the reasons can become a problem when employees don’t take into consideration legitimate and protected reasons for some rules and laws. For example, requested time off for maternity leave.
“Employers may think putting time off into the proper ‘bucket’ no longer matters if you have an unlimited leave policy, but it does,” adds Carsen. “If you don’t appropriately categorize the protected leave, you may not apply it correctly. You may not know when that special leave is expiring, and an employee may not give the appropriate notices,” Maggie Grover, a partner at Wendel, Rosen, Black & Dean LLP, told HR Dive.
Grover also said, “When is the leave paid, and when is it unpaid? If you don’t write the policy correctly, the employee will expect that the time is paid; the employer certainly won’t.”
Don’t forget to include your fulltime remote workers. These employees will likely have additional questions
Making PTO Work
Regardless if you provide limited or unlimited time off, here’s what you should to do to make it work for your business:
- Don’t call it “unlimited.” Instead, use terms like flexible or “personalized time off” to prevent any confusion or abuse.
- Make sure to anchor the policy to your core values.
- Clearly explain expectations. Employees must understand that in return for generous time off policy, they still need to get their work done.
- Establish guidelines for how time-off requests are approved or declined.
- Don’t focus on how much time your team is putting in at work. Instead, take a look at the employee’s contributions.
