What is Unlimited PTO, and Is It Right For Your Business?

What is Unlimited PTO? And why are major companies like like Netflix, LinkedIn, and Oracle jumping on the bandwagon and offering their employees unlimited vacation time?

Unlimited Paid Time Off (PTO) is an increasingly popular trend in businesses today. While there definite risks involved, the benefits of an Unlimited PTO policy are exciting for both employee and employer.

Read on to learn the pros and cons of offering Unlimited PTO, whether it’s the right call for your business, and how to make Unlimited Paid Time Off work.

What is Unlimited PTO?

Put literally, Unlimited PTO means that your employees get unlimited paid time off (PTO).

Traditional PTO policies limit PTO to a certain number of days – e.g. a maximum of 10 days’ paid time off per year.

But with an Unlimited PTO policy, there is no official cap on vacation time.

This allows greater flexibility and autonomy for employees, and in some cases makes it easier for the business to manage.

This type of leave policy may also be known as unlimited vacation, open PTO, flexible PTO or flexible time off.

How Does Unlimited PTO Work?

While there is no set limit on the number of vacation days available to employees, Unlimited PTO doesn’t mean that it’s completely optional whether to show up for work or not.

The idea is that employees still have a regular working schedule (i.e. 9-5, Monday to Friday). Each employee still has their regular duties and responsibilities. And if they want to take vacation time, they’ll need to put in a time off request.

For most companies, it’s not 100% unlimited, either. A person can’t simply take 6 months of the year off, or take every Monday and Friday off.

Unlimited PTO is unlimited within reason. It’s like a fair use policy – as long as you don’t abuse the policy, and fulfill all your duties and responsibilities, you’re not going to be held to a strict annual leave limit.

Pros of Unlimited PTO

Let’s take a look some of the benefits that Unlimited PTO policies offer.

Happier Employees

When you give employees more freedom, flexibility and autonomy, they’re almost always going to be happier.

It gives people more time and freedom to maintain a work/life balance, where they can spend time with friends and family and enjoy a life outside of work.

Increased happiness means a more positive work environment, fewer burnt out employees, and less turnover, which are all big benefits for the business.

Increased Productivity

Evidence suggests that the more time employees take off (within reason), the better it is for productivity.

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

Unlimited PTO policies give employees the freedom to take time off when they need it. This makes them more likely to stay fit and healthy, both physically and mentally.

Greater well being leads to higher energy levels, less sickness, and better overall productivity (even if their number of days off is higher).

Simpler for HR

Leave management can be time-consuming, particularly in the small details. Tracking different leave types with their own limits, and categorizing whether something counts as annual leave, sick days, personal time off, etc.

Unlimited PTO can make it a whole lot easier by lumping all leave types together under one umbrella.

Managing things like accruals and rollovers (unused leave carrying over to the following year) are even more complicated. This is another way that Unlimited PTO makes everything much simpler, which is a big benefit for smaller teams who may not have a dedicated human resources team.

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.

An Unlimited Vacation Policy achieves both. Employees get more vacation days, and also get more flexibility over their schedule.

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.

Performance-Based Measurement

Many businesses judge their employees based on attendance. High performers are those who work long hours or rarely take time off, regardless of how much they actually produce.

Unlimited time off forces companies to judge employees based on actual performance. It sets an expectation that, as long you get your work done and meet key performance metrics, you’re free to take as much time off as you want.

This change in culture is going to lead to better results, because people are now results-oriented, instead of being judged on the illusion of being productive just because they come to work every day.

Cons of Unlimited PTO

There are some downsides to Unlimited PTO policies. Things can go wrong with poor management or in the wrong environment.

Let’s look at a few potential cons of unlimited vacation.

Managing Your Leave Calendar

If there’s an increase in people taking time off, that also means more effort needed to manage the team’s vacation calendar.

If this calendar isn’t managed well, you can find yourself short-handed, with too many people on leave and no one left to keep the business running (particularly for businesses or roles that involve customer service or dealing with clients).

It’s vital you set up an efficient time off management system. A tool like Flamingo is a must here, to help make sure there are no major disruptions due to employees taking time off.

Potential for Abuse

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

Unlimited PTO abuse is not as common as one might expect, but it’s always a possibility. It puts a lot of emphasis on:

a) hiring the right people, who are unlikely to abuse the system

b) setting expectations, that time off is not actually unlimited, and fair use applies

c) setting up robust performance-based KPIs, so employees are not motivated to game the system

Employees Taking Less Time Off

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

That’s because, with a regular PTO policy, people know what’s expected. If your leave policy gives 15 vacation days, the expectation is that you can take 15 days off.

But with an unlimited vacation policy, it’s a little unclear. Many people are afraid to take time off, because they’re unsure whether or not they’re taking too much PTO.

While this means more working hours, it’s ultimately detrimental for the company, because employees are more open to stress and burnout due to overwork.

How to Make Your Unlimited PTO Policy Work

A successful Unlimited PTO policy takes a bit of care and maintenance. If not managed correctly, it can easily go wrong and result in a loss in productivity and a negative company culture.

Here are some tips to consider in order to make your company’s Unlimited PTO policy run smoothly:

Create A Clear Leave Policy

Every business should have a clear and easily accessible company policy that spells out how paid time off works.

This policy should include expectations in regards to fair use, as well as the process for requesting time off.

It can also set expectations that time off requests need manager approval, and may be declined, even though there is no hard limit on PTO.

This means less stress for employees, as they have a clear idea of what’s expected of them, and it makes it easier to deal with cases of abuse as there’s a clear company policy to point to.

Hire the Right People

A business that offers Unlimited PTO needs to focus on hiring self-starters, who can work with minimal supervision and hand-holding.

That’s where freedom and flexibility can be a double-edged sword. It’s great for the happiness and well being of your team members, as long as they’re not the type of people who can only work within clear boundaries.

The right hires are also those who are less likely to abuse an Unlimited PTO policy, because they understand the concept of fair use and don’t want to take more than their fair share.

Track The Right KPIs

The real key to making an Unlimited PTO policy run smoothly is finding the right performance-based metrics to judge employees on.

When you do this, unlimited time off becomes an attractive carrot to dangle in front of people. As long as they get their work done, they can essentially take as much time off as they want.

This incentivizes people to work faster and more efficiently, because this essentially increases their vacation day allowance.

Set Up a Leave Tracking System

Your leave management system becomes vital if you want to provide Unlimited PTO.

If everyone takes time off at the same time, you risk missing deadlines and upsetting clients. A robust system for requesting PTO will make it easy to manage the number of people on leave at any given 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 tracker like Flamingo shows you people who work too long without taking time off. You can then encourage these employees to take a day or two rest and refresh 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 time off may be too much of a leap.

Large companies may struggle with this type of leave policy. The same goes for businesses in the service industry, or similar fields where it’s necessary to have a minimum number of people on call at any given time.

But for small to medium-size teams, remote teams, and tech companies that are production-focused rather than service-focused, unlimited vacation generally 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, in the way of increased productivity. Not to mention, helping you attract more talented new hires. Read through the pros and cons as outlined above, and understand how to make a flexible leave policy in your business work successfully.