Unlimited paid time off: These four simple words can create quite a reaction in employees. The initial reaction is excitement and wonder, “I can take every Friday off and still get paid?” The fact of the matter, though, is that unlimited PTO isn’t quite that simple and any employer who is considering implementing this policy needs to think through the potential causes and effects. So before your employees start imagining themselves traveling the world every third week of the month, read through these pros and cons.
At TIMECO, we provide tools and resources for businesses to effectively manage their payroll, time tracking, and more. Our online time clock is made for employees and employers who need a modern and convenient method of managing time, attendance, and PTO. Learn more about our employee time tracking software and hardware and contact our team today for a demo.
Pros of Unlimited PTO
Easier on HR
This is especially important for larger companies who will have dozens of PTO requests each week. Even though a human resources manager will most likely only check into PTO reports once a week, there may be hundreds of items that need attention. Managing requests, denials, changes in requests, what happens when someone is out of PTO but still needs a day off — these things are time-consuming and can cause a significant amount of financial loss. When an organization has unlimited PTO, many, if not all, of these concerns go away, allowing HR professionals time to focus on other tasks.
Depending on your existing PTO policy, some employees who have been with the business for a long time may have six, seven, or even more weeks of PTO. This amount of PTO can sometimes be challenging for employees to use up throughout the year. What this means is that any PTO balance will need to be paid out at the end of the year. An employee with five days remaining, who makes X amount of money each day — that can add up to a hefty amount, especially when dealing with multiple employees in this situation.
Different organizations handle their PTO policies differently, however, for businesses that categorize their PTO into sick days and standard days, unlimited time off provides a level of flexibility and freedom. When an employee needs, or even just wants, a day off, they don’t need to specify the reason why.
There is also a level of trust that comes with an unlimited PTO policy. In order for the policy to be successful, employers need to be able to trust that the employees aren’t going to abuse the system. Trust needs to be felt on both sides, though — a business needs to trust that employees won’t take advantage of the system and employees need to trust that the business won’t guilt them into working more.
Everyone knows that feeling when they come into work after a rejuvenating vacation, the feeling that they can take on everything that is put in front of them. A recent study completed by the University of Tampere in Finland suggests that the perfect length of vacation is eight days. When a reasonable PTO policy in the U.S. provides 10 days of vacation in a year, that doesn’t leave much wiggle room to get away from the stress of work and to come back rested and ready to work. Maybe employees won’t actually take multiple, eight-day vacations in a year, but the freedom to take at least a few four-day weekends here and there without worrying about a PTO balance will allow employees to rest, stop thinking about meetings and emails and come back ready and able to work. With PTO out of the equation, employers can look forward to the increased productivity that occurs when employees are rested and rejuvenated.
Recruiting/Retention is Easier
Whether you’re in the healthcare industry or the IT industry, organizations need to stay competitive when hiring top talent. Unlimited PTO is a perk that isn’t offered at many businesses, so it might be just the thing to give your company the edge it needs. This can be especially enticing for potential new hires with families who will want to use the additional time off during the summer.
Cons of Unlimited PTO
Even though there isn’t a limit to the amount of PTO an employee can take, it doesn’t mean that an organization can be lax about expectations and standards. In any world, even with unlimited PTO, an employee won’t stick around long if they abuse the system and actually take every Friday off. If expectations aren’t set in a clear and straightforward way, it can result in employees not taking PTO at all. Organizations need to have a clear policy regarding how much PTO they can use, when and how to schedule it, and a process that clearly states what happens when too much PTO is taken and work isn’t being completed.
In order to avoid big gaps in attendance, there needs to be a clear and well-managed schedule of time off. Since PTO isn’t going through HR, with unlimited PTO, the responsibility of managing who is in the office and who isn’t falls on direct supervisors. This can become a cumbersome task in peak holiday seasons or during summers when everyone wants to get away. If there are any attendance gaps, when too many people are out of the office, this can have a significant impact on project timelines and productivity.
Resentment Over Lost Accrued Time
Making the switch to an unlimited PTO policy can be a challenge and may result in some resentment from employees if their accrued PTO isn’t paid out. Some businesses may look forward to saving some money making this switch, but there could be an initial cost depending on the number of employees who have PTO saved up which now needs to be paid out.
Vacation Abuse or Burnout
Two cons in one: there may be employees who take advantage of the benefit and those who don’t take enough vacation in order to keep up with their work. Either situation could result in a loss of capital for the organization and a loss of productivity. Even though an unlimited PTO policy means that HR has one less task to do, it also means that it could make it harder for employees and supervisors to monitor how much vacation is being taken and the morale of their employees.
With an unlimited PTO policy, it can appear as if employees have all of the freedom and possibility, but even with such a freedom, employees may not actually take advantage of it. If a supervisor has only taken a couple of days off within six months, an employee may feel guilty about taking PTO themselves. An employee may feel that if they do take vacation, it could result in negative feedback during reviews or that a sense of authority is taken away because they aren’t as focused on their work as others are.
Putting an unlimited PTO policy in place requires planning, testing, and time to thoroughly think through the pros and cons. There are various reasons why this policy isn’t put in place, including fear that employees will take advantage of it, employees will take vacation at the same time, employee burnout from fear of taking a vacation, the time it takes to create policies, and training leadership on implementing these policies.
What’s the Answer?
There’s no right or wrong direction, but it depends on your organization’s existing structure, it there is an existing trust between employer and employee, and if there is a standard of communication about feelings of burnout. Given the right organization, unlimited PTO can provide a range of benefits that are good for everyone.
Find a Solution With TIMECO’s Online Time Clock For Employees
Whether you’re a healthcare organization or a golf club, TIMECO has a solution for your time and attendance needs. Our hardware and online time clock software make it easy to schedule days off, schedule shifts, make adjustments, calculate overtime pay, and more. These features have a variety of benefits for HR and supervisors, but our online time clock also makes it easy for employees to clock in at the beginning of shifts, punch in when working remotely, request PTO or a shift change, and more.
TIMECO is passionate about providing organizations a solution. Our online time clock for employees is easy to use for everyone and has several features to make reporting and auditing simple and efficient. With the right online employee scheduling tools, it’s not about whether it’s a standard PTO policy or unlimited PTO, but about how the policy is managed. Manage it better with TIMECO.