What is an Unlimited PTO Policy, and is it Right for Your Business?

Andrew Buck July 22, 2021

You may have heard that companies like Netflix, LinkedIn, and Oracle are providing unlimited paid time off for their employees.

You also might be wondering if unlimited PTO makes sense for your business, to simplify HR processes, boost employee morale, and improve productivity.

On the other hand, perhaps you’re thinking that there’s no way a business can operate efficiently while offering their staff as much time off as they want.

In this article, we’ll clear everything up. We’ll discuss what unlimited PTO is, and some of its pros and cons. We’ll also talk about how to make unlimited PTO work, and if it might be a good fit for your business.

What is Unlimited PTO?

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

In other words, there’s no cap on the number of paid vacation days your team members can take.

This type of time off policy works on the premise that employees are compensated based on their performance, and not their attendance

So, as long as your employees meet their goals and expectations, and they perform at a high level, it doesn’t really matter how many days they take off from work.

Unlimited PTO is a relatively modern concept that is gaining popularity among the younger generation of employees who value flexibility and autonomy.

How Does Unlimited PTO Work?

A common misconception is that unlimited PTO means that any employee can take off whenever they want, and they can go on vacation for as long as they choose.

In reality, it works quite differently. There still needs to be a leave management process that tracks and manages employee absences. 

That means employees must request leave, and the HR manager must approve/deny the leave request based on how their absence might affect deadlines, workflow, and productivity.

HR must also track how many days each team member is taking off to make sure that the workload remains equally distributed, and that no one is abusing the unlimited PTO policy.

The biggest difference between regular PTO and unlimited PTO is that the latter does not have hard limits on the number of days employees can take off within a given year.

Providing your employees with unlimited time off each year can reap significant benefits if it’s a right fit for your business (more on that below). But there can also be some downsides.

Next, let’s take a look at some of the pros and cons of unlimited PTO.

Pros of Unlimited PTO

If implemented correctly, then there can be several benefits that come with an unlimited PTO policy.

Happier, More Productive Employees

Your leave policy should, ideally, help produce happy and healthy employees who perform at their best, and contribute to a harmonious and productive workplace. 

An unlimited PTO can help you achieve that. 

Your team members will enjoy a greater sense of responsibility and autonomy. They will have more control over their calendar, and that added sense of freedom could boost morale and improve performance. 

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

Simpler to Manage for HR

If you’re running a small to medium-sized business, it might not make sense to include every single leave type in your time-off policy. 

Instead, you could institute an unlimited PTO policy that includes any reason your staff may need to take leave.

So, 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.

As long as there is an efficient system to request, approve, and track absences, you could potentially save a lot of time and effort by consolidating all types of leave under unlimited PTO.

Need a tool to help you efficiently track and manage leave in your business? Check out Flamingo for free today.

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.

Attract 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 – it potentially offers more vacation days, and also provides your employees with more control over their calendar.

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

Further Reading: learn the most sought-after Employee Benefits, and which are right for your company’s benefit package.

It’s All About Performance

If you allow your employees unlimited time off, then the focus can shift to metrics that really matter. 

Instead of using attendance as a metric of employee engagement and productivity, you can focus on performance and results.

Ultimately, focusing on the right employee performance metrics could increase your company’s overall efficiency, and result in better products and services, increased revenue, etc.

Cons of Unlimited PTO

There are some potential downsides with unlimited PTO. If managed poorly, or put in place for the wrong team or environment, it can lead to problems for your business.

Here are some reasons unlimited PTO may not work for you.

Mismanaging Team Leave Calendar

A company with unlimited PTO might be less likely to efficiently track employee absence. 

If anyone can take time off whenever they want as long as they complete their tasks, it could lead to a mismanagement of the team leave calendar.

You could end up in a situation where too many people take days off at the same time, and tasks get delayed, communication is disrupted, and deadlines are missed.

Easier to Abuse

Unless you take steps to prevent it (as we explain below), it might promote absenteeism and some employees might abuse the unlimited PTO policy. 

Although, companies that have implemented unlimited PTO so far haven’t reported too many of these cases. 

So, it is unlikely to be an issue if you hire the right people and manage the leave tracking process. But keep in mind that abuse is always possible without the rick checks and balances.

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 Unlimited PTO Work Smoothly

There are steps you can take to make sure that your company’s unlimited PTO policy works smoothly. 

Here are a few tips to consider.

Leave Tracking System

A leave tracking system will allow you to efficiently track and manage the leave request process, as well as the team leave calendar.

As we explained above, you still need to keep track of who is away on leave on what days, even if you provide unlimited days off.

This is to make sure that you don’t end up short-staffed at any point during the year, which might impact business operations, client deadlines and production, among other things.

A leave management system will allow you to track and view the entire leave calendar for your team. It will help you decide whether you should approve or deny a leave request, and make sure that you’re adequately staffed all year long.

Further reading: 9 Features Your Leave Management System Must Have.

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.

A Clear Leave Policy

Even if you offer unlimited PTO, you need to have a clear leave policy that you communicate to all your employees. 

The purpose of a clear leave policy is to make sure everyone is on the same page as far as how to request leave, and the process of approving/denying those leave requests.

Staff should know that, while there is no set limit to the number of days off they can take, their request may be denied if the situation calls for it.

Here are a few things to consider when it comes to your leave request policy.

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.

When Does Unlimited PTO Make Sense?

Unlimited PTO makes most sense if you’re running a small to medium business with several remote employees. 

For these types of businesses, it may not make a whole lot of sense to have HR track and manage too many different types of leave. Instead, you could use a leave tracking system to manage the team vacation calendar, and categorize all leave types under unlimited PTO.

And if you’ve got remote team members, chances are better that they are self-starters and they know how to perform well with minimal supervision. 

So, hopefully you can rely on them to get the job done and be available when needed, regardless of how many days they take off.

Final Thoughts on Unlimited PTO

Unlimited PTO is a new trend when it comes to time off policy that is gaining popularity among millennials and Gen-Z employees, who tend to value flexibility and more vacation time.  

Providing unlimited PTO can help you attract the best employees, and it can also help you get the best out of them, resulting in greater success for your business. 

But keep in mind that there could be downsides, as mentioned above. You can implement some of the tips mentioned in this article, like using a leave tracking system, to make sure your unlimited PTO policy works smoothly and brings out the best in your team members. 

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