Is Unlimited PTO Right for Your Business? [Pros & Cons]

You may have heard that companies like Netflix, LinkedIn, and Oracle are offering their employees unlimited PTO (paid time off).

Sounds crazy, right? How can these companies expect to be productive when they’re letting people jet off on vacation all the time?

It works for these companies, and many others that have adopted similar policies.

In this article, we’ll share everything you need to know about unlimited PTO, it’s pros and cons, and whether it’s right for your business. If you’re skeptical, keep reading – you might be surprised!

What is Unlimited PTO?

There’s no hidden meaning here – Unlimited PTO means that your employees get unlimited paid time off.

So, instead of telling your team they have a maximum of 10, 15, or 20 (for example) paid days off per year, there is no official cap on how many days off they can take.

The core idea is that employees are compensated based on their performance, and not their attendance. 

As long as someone meets their goals and expectations and actually produces what’s asked of them, the number of days they’re at work is inconsequential.

Unlimited PTO offers some unique benefits, such as flexibility and autonomy, both of which today’s workforce values higher than ever before.

However, an unlimited PTO policy requires certain conditions and a degree of management to ensure it doesn’t cause problems to the business.

How Does Unlimited PTO Work?

By name, unlimited PTO means employees aren’t restricted on the number of days they can take off. But it’s not as simple as making it completely optional whether to show up to work or not.

Employees still have a regular schedule when they’re expected to be at work. They still have regular hours and duties they need to fulfill. And to take leave days, they are expected to fill out a leave request and have it approved.

Someone can’t just take 6 months off, or take Monday and Friday off every week.

In reality, unlimited PTO is a bit of a misnomer. It’s not truly unlimited. There’s just no hard limit.

In a team with an unlimited PTO policy, the HR department or individual managers need to keep track of how much time employees take off, and ensure the policy is not abused. It’s also important to track productivity, to know there’s no disruption to deadlines or workflow.

So, it takes some work, and the right culture to make unlimited PTO work. But done right, it offers some big benefits.

Pros of Unlimited PTO

Unlimited PTO wouldn’t be going through such a surge in popularity without clear and attractive benefits. Here is a rundown.

Happier Employees

When you give employees the freedom, flexibility and autonomy of an unlimited PTO policy, it stands to reason they’ll be happier.

By giving them more time to rest, refresh, go on vacation or devote time to personal projects, you’re sure to see a marked improvement in mood, and a reduction in burnout symptoms.

Employee happiness should always be a focus for business owners and managers, as these employees contribute to a more positive work environment, and cut down the cost of turnover.

Higher Productivity

Although it may seem counterintuitive, evidence suggests that the more time employees take off (within reason), the better it is for their productivity.

Simply put, when workers have more time to recharge, they’re likely to produce at a higher level.

Flexibility in regards to time off makes for greater employee wellness, putting them in the right state they need to be to crush it when they’re in the office.

Simpler to Manage for HR

There are a lot of little details in leave management that can be time-consuming to deal with.

You’ve got a number of different leave types to take into account. Fitting these into your leave policy and classifying each can be more trouble than it’s worth.

Instead of separately tracking and managing sick leave, vacation days, maternity leave, bereavement leave, personal leave, etc., you could categorize them all under unlimited PTO.

This takes a lot of strain off HR, allowing everything to be covered under one blanket designation of PTO.

It Can Be Cost Efficient

Depending on the location of your business and local labor laws, your business could end up saving money with an unlimited PTO policy.

With a regular PTO policy where employees get a specific number of paid leave days each year, you might have to compensate them for any unused PTO days at the end of the year, or if their contract is terminated. 

With an unlimited PTO policy, you’re not required to do so, because there won’t be any such thing as unused vacation days.

Attracting Top Talent

Harvard Business Review reports that flexible work hours and more vacation days rank among the top desirable benefits for job seekers, right after better healthcare.

Unlimited PTO accomplishes both. Employees get more vacation days, and also provides your employees with more control over their calendar.

As such, unlimited PTO can be a competitive advantage for you when it comes to recruitment, especially if you target millennial or Gen-Z employees.

Shifting Focus to Performance

Allowing flexible or unlimited time off forces you to switch focus to metrics that really matter.

Instead of judging someone’s worth on the basis of attendance, you begin to judge on actual performance.

It’s all too common for certain employees to show up every day, putting on the image of a model employee, yet produce below-average results.

On the other hand, we view some employees as bad apples because of their attendance, yet they actually end up producing more in terms of hard results.

Unlimited PTO sets the expectation in your business that you’re results-based, which is likely to result in higher productivity and a higher standard of work produced overall.

Cons of Unlimited PTO

There are some downsides to an unlimited PTO policy. Poor management, or instituting unlimited PTO in the wrong environment, can result in losses or struggles for the business.

Let’s take a look at a few reasons why unlimited PTO may not work.

Managing Your Leave Calendar

More people taking time off means more effort needs to go into setting up and maintaining a leave calendar.

While you want to be flexible to allow employees to take time off when they want, it’s also important to make sure you meet deadlines and get the work done.

If you don’t pay enough attention to scheduling, you could end up in a situation where a lot of people go on leave at the same time, causing disruptions to productivity.

Easier to Abuse

Unless you take steps to prevent it, some employees may take advantage of your unlimited PTO policy.

Companies that have implemented unlimited PTO so far haven’t reported too many of these cases. But it’s always a concern for teams that don’t limit their employees’ leave days.

Unlimited PTO requires you hire the right people, who are less likely to want to take advantage of the system. It also requires some effort to keep track of how many leave days each employee takes, to quickly identify any problems.

Employees Taking Less Time Off

It sounds strange, but an unlimited time off policy can actually mean staff take fewer days off.

The reason for this is, when there’s an allowance or cap for vacation days, staff usually want to take advantage of everything that’s on offer to them.

Yet when vacation days are no longer scarce, employees aren’t so motivated to make sure they take all the days off they can anymore.

The result is staff taking less time off, and leaving themselves more open to burnout and stress.

How to Make Your Unlimited PTO Policy Work

Unlimited PTO requires certain care to ensure nothing goes wrong. How you set up and operate your leave policy can dictate whether it hurts or helps productivity.

Here are a few tips to consider.

Create A Clear Leave Policy

Every business should have a leave policy, that describes the leave request process and what’s allowed for employees.

This is particularly important for unlimited PTO workplaces.

You need to make it clear that unlimited PTO isn’t an “anything goes” policy. This means communicating how employees go about asking for time off, and in which circumstances you might decline their request.

Make sure everyone is on the same page, and know the expectations and allowances in regards to time off.

Hire the Right People

Unlimited PTO will only work if you hire the right people from the get-go. You need self-starters in your team who can work with minimal supervision. 

They need to have a sense of ownership about their role in your company. You can structure employee incentives in a way that they’re rewarded if the company performs well. 

That way, you can rest assured that everyone in the company will be performing at their best if they stand to benefit from it. You’ll also be less likely to have to worry about your team members abusing the unlimited PTO policy.

Track The Right KPIs

The best way to make unlimited PTO work is to evaluate employees based on results and production.

What tasks are they responsible for, are they completing those tasks on time, and how is their performance benefiting the company overall?

If you track performance instead of attendance, it becomes less of an issue how many days they’re taking off, as long as your employees meet expectations and reach their objectives.

Set Up a System for Leave Tracking

You need some way to track who is on leave, and how often your team members take leave.

Scheduling is one of the biggest things that can go wrong with unlimited PTO, so it’s vital you have an efficient vacation calendar in place.

You don’t want to end up short-staffed due to approving a few too many leaves at the same time.

Leave tracking also helps keep tabs on employees, in two ways. First, identifying anyone abusing the system by taking too many days off. And second, you also want to keep track of people who don’t take enough leave.

A leave tracking system – like Flamingo – shows you people who work too long without taking time off. You can then encourage these people to take a few leave days and help prevent them from burning out.

Is Unlimited PTO Right For You?

So, what’s the verdict? Should your business offer unlimited PTO?

The short answer is, it depends. Not all businesses are alike, and for some, unlimited PTO may be too much of a leap.

But for small to medium sized businesses, especially remote teams, unlimited PTO works great.

It allows these businesses to save time and effort on HR processes, and takes away some of the hassle of dealing with leave allowances for team members in different areas of the world.

In addition, employees in remote teams or early-stage startups are more likely to be self-starters, and the kind of workers who value flexibility and autonomy.

Offering the freedom of unlimited PTO may allow you to get more out of your team members, and attract new, talented employees as well.

Final Thoughts

Unlimited PTO is a new and growing trend in today’s employment landscape.

It’s particularly popular with millennials and Gen-Z employees, who value flexibility and work-life balance more highly.

Offering this in your team may just help you get more out of your team members. Not to mention, helping you attract more talented new hires.

However, ensure you’re familiar with what can go wrong with unlimited PTO. This type of leave policy requires care and attention to run smoothly.

But if you take the effort to set up your leave management system the right way, you might find unlimited PTO works wonders for your team.