Simplifying Leave Management with Unlimited Paid Time Off
Author: Victoria Kelleher, Lead Survey Specialist
Paid leave is one of the most important elements of a company's benefits package. The amount of paid time off (PTO) has an immediate and tangible impact on an employee's work-life balance.
In some situations, competitive paid leave might make or break the acceptance of a job offer. This is especially true for top talent or workers who join a company at a higher job level, since these candidates often have multiple opportunities to weigh in a job search. Striking a proper balance is essential for an employer to attract and retain employees.
Paid Leave Systems
When it comes to paid leave, most companies define the exact number of days a given employee will be granted annually. An employer may either set an overarching number of days in a combined PTO bank to be used for all purposes or define categories of leave with separate allocations (e.g., vacation days; sick leave; bereavement leave; etc.). Most companies primarily have this type of system.
Alternatively, some companies use an "unlimited leave" system, in which employees are free to request PTO at any time at their manager's discretion. However, according to a recent survey from Brightmine, only about 3% of companies have a system that offers employees unlimited paid leave across the board.
Although it is rare for a company to offer unlimited PTO to every employee, companies sometimes offer this perk to a subset of employees despite using a more traditional system for others. About 14% of companies offer unlimited PTO to at least a subset of employees.
Those that only provide this perk to some employees tend to offer it to either high-ranking employees or those who fill specialized roles. It is generally thought that employees in these roles have a high degree of ambition and self-discipline, so it is unlikely that they will abuse the privilege of unlimited leave. These jobs may also be more adaptable since the deliverables often rely on the employees to effectively manage their time to meet deadlines.
Benefits of Unlimited PTO
Offering unlimited PTO can be a significant perk to attract top talent. It boosts flexibility and work-life balance for employees, which can be a great boon for recruitment even for highly competitive candidates. Highly specialized workers are often attracted to the flexibility and trust inherent in this system.
Unlimited PTO can also optimize the way employees work, allowing them to adapt their workflows based on what works best for them. It often improves efficiency and productivity at work, since workers understand that they will be rewarded with time off as soon as they reach milestones and cover their obligations.
This system can very clearly demonstrate a company's values, allowing skilled employees to have a greater degree of autonomy and control over their schedules. It may encourage skilled employees at higher levels to take greater ownership of their work and be more invested in business outcomes. It can improve a company's culture and directly increase retention of top talent.
There are also practical benefits to an unlimited PTO system. Without an "expiration date" for PTO, employees are less likely to all schedule time off at the same time right before it expires. For HR, unlimited PTO also alleviates the burden of having to track the use of PTO over time. It eliminates the risk of having to compensate employees for unused PTO at separation, which can improve the accuracy of budget projections and decrease financial liabilities.
Potential Drawbacks
Although a lot can be said for the benefits of unlimited PTO, this system can also sometimes pose some complications. Although the first that may come to mind is the risk of irresponsible and excessive use of PTO, research has shown that employees often take less time off under this system than they would take otherwise. The lack of clear guidelines around PTO can create a culture where employees are worried to take too much time off, especially if colleagues are not taking their own.
Although this may initially sound like it could lead to benefits like higher productivity, employees deprived of the rest that comes with paid time off tend to be more susceptible to burnout. There is also the possibility that some employees may take more time off than others, leading to an uneven work distribution and resentment. This may be one of the reasons that most companies with unlimited PTO only offer it to employees at higher job levels.
Additionally, an unlimited PTO system may sometimes cause issues with compliance. The system may not be appropriate in states that have stringent laws about tracking PTO or compensating employees for unused PTO. Employers should therefore carefully consider applicable laws before deciding to implement an unlimited PTO system with employees.