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One of the more controversial employee benefits is unlimited PTO. Some companies swear by it while others don’t see how it’s possible. Read on to make the best decision for your company and mitigate possible risks.

What Is Unlimited PTO?

Unlimited PTO gives an employee as much paid time off as they need throughout the year. Unlimited PTO generally includes vacation time, sick time, and personal days. Unlimited PTO often illustrates to candidates that a company cares about their work-life balance and mental health.

Unlimited PTO vs. Traditional PTO

There are several different variations in how companies implement PTO policies. The two most common are traditional PTO and unlimited PTO. Traditional PTO is generally accrued over time with different rates based on the tenure of the employee. Other companies may offer a blanket amount of PTO at the start of employment. These employees often have a PTO bank they must use when they want to take time off work. Unlimited PTO is not accrued and is generally available immediately to the employee. Rather than just one or two weeks of time off, the employee may use as much time off as they see fit.

Pros of Unlimited PTO

Many companies are beginning to implement unlimited PTO because they see several benefits. Starting a new policy always includes risks, but here are a few things that may encourage you to take the leap.

  • Employee work-life balance. One of the most important and impactful benefits of unlimited PTO is the work-life balance it gives to the employee. When employees feel they have time to take off work and give the necessary attention to their families and personal health, they feel valued. Companies who implement unlimited PTO policies may see improved retention rates as employees recognize the value the company places on their well-being.
  • Responsible employees. Part of implementing an effective unlimited PTO policy may include setting expectations with employees for their work and deadlines. Because employees understand the value of such a benefit, they will make sure everything is accounted for before taking time off. Employees see PTO as a privilege and not a guaranteed right.
  • Cutting costs. Another pro of unlimited PTO is saving money by avoiding  payout to employees at the end of employment. With some traditional PTO policies, employees can save up their time to receive a payout when they leave the position. This could create unnecessary stress for the employee and deter them from taking important breaks that could improve their productivity.
  • More time. Finally, employers can save on unnecessary time spent tracking PTO and focus on more pressing tasks. This gives your employees the satisfaction of knowing they are trusted by their employers.

Cons of Unlimited PTO

While unlimited PTO is very appealing to both employers and employees, you may still have some doubts.

  • Employees taking advantage of the system.  Many companies avoid implementing an unlimited PTO policy because they worry employees will take advantage of it and take too much time off work. When developing your policy, consider including disciplinary measures for employees who fail to meet work requirements because of too much time off. Having unlimited PTO does not mean an employee can take PTO without a supervisor’s approval.
  • Financial concerns. Some companies worry about paying employees when they are not in the office. For this reason, they may say, “We can’t afford an unlimited PTO policy.” However, this cost is often balanced by savings through reducing turnover, lowering possible medical costs, and decreasing hiring costs.
  • Lack of communication. Another concern could be employees missing deadlines or not communicating when they will be out of the office. Again, ensure there is sufficient time and effort spent developing your policy. Establish procedures for how an employee should go about asking for time off and what needs to be done before leaving. Prioritize meeting deadlines and having work taken care of before an employee is out.

How To Start and Manage an Unlimited PTO Program

Making the decision to start an unlimited PTO policy can seem like a daunting task. However, following these steps will help ensure a smooth and effective transition.

Step 1: Make the Decision

The first step is to decide if this is the right decision for your company. Although we’ve discussed the pros and cons for this benefit and offered ways to mitigate risks, it is ultimately up to the employer to make the decision. Decide what this policy will look like for you. Perhaps salaried employees will have unlimited PTO while hourly employees will continue to accrue PTO over time. Maybe unlimited PTO is granted after a certain number of days of employment. Whatever the case may be, decide what works for your company and start defining it.

Step 2: Write a Policy

It is critical not only to develop a policy but also to write it down so employees can easily access it when they have questions. It’s also important to have written policies in case they need to be referenced during disciplinary conversations or terminations. Make sure you include all the details of your policy. Determine the process for requesting time off, specify the expectations for the employee leading up to their time off, and include how or if time off will be tracked. Include the policy in your employee handbook, in your onboarding process and anywhere you feel is important for visibility to your employees.

Step 3: Communicate the Policy

The last step is to communicate the new policy to your employees. Change is always difficult even if it’s a positive one. Make sure you communicate the policy clearly and directly. Allow employees to express concerns and questions they have. As new hires join, make sure they are aware of the policy. Reinforce the policy, be consistent, and stick to what you have written.

Examples of Companies Offering Unlimited PTO

Many companies are beginning to offer unlimited PTO. With the aftermath of COVID-19, candidates are looking for more flexibility and more work-life balance. Unlimited PTO can be a competitive benefit that will draw applicants to your company.

Divvy

Divvy is a tech company in the Silicon Slopes community that offers company cards that employees use for company purchases, company budgeting, reimbursements, and more. Divvy has many unique benefits, one of which is unlimited PTO.

Weave

Another company which has implemented the unlimited PTO policy is Weave. Weave offers a software system which allows dentists, doctors, and others to communicate easily with their clients for scheduling, payments, and more.

Gabb Wireless

Yet another example of companies with unlimited PTO is Gabb Wireless. Gabb Wireless illustrates their focus on families as they sell phones and other technology specifically marketed for protecting children.

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Questions You’ve Asked Us About Unlimited PTO

Sick leave and medical leave is a determined amount of time that an employee is gone from work. This leave is unpaid and is tracked with the expectation that the employee will return to work after that period of time. Sick and medical leave also have certain requirements for employee eligibility. It should be determined in the policy what type of leave unlimited PTO can and cannot be used for. This should be consistent across all different types of leave (SHRM).

While you can offer unlimited PTO to all of your employees, it may be best to give at least your salaried, exempt employees unlimited PTO. Hourly, non-exempt workers are required to receive overtime when they work over 40 hours and in some cases it may be difficult to navigate this with unlimited PTO. Furthermore, some employees may work a different number of hours each week. For salaried employees who are generally paid the same amount each week, unlimited PTO is a great option and time off is easily manageable.

Since unlimited PTO can be more complicated with hourly employees, make sure you have a clear policy. HR professional Chris Ruddy says that while it’s not an issue to offer unlimited PTO to hourly employees, “you’ll just want to make sure that everything is properly documented in your handbook and that the policy is applicable to all types of employee, salaried or hourly.” He also emphasizes that it’s important to learn about state laws regarding PTO. “In California, (among other states), PTO that is accrued by an employee must be paid out upon termination. Since unlimited PTO is an infinite pool of time off, it would seem unclear what is paid out if an employee in California leaves the company.” If you know your state’s laws, your company is less likely to run into trouble.

Ashley Whitelock graduated from Brigham Young University with a degree in Sociology. After deciding to pursue a career in HR, she received her certification as an Associate Professional in Human Resources. In 2021, she started working as an HR Generalist for CIT Electronics.

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