Many companies are moving away from limits on paid-time-off or “PTO” and instead, incorporating a policy that provides unlimited PTO for its employees. But is that a good thing or a bad thing?
“Back in the day…”
Let’s start by looking at traditional PTO. Formerly. the standard used to be that most companies provided employees with certain time off, with pay, for vacation, sick time or personal time (e.g. to attend a funeral). In recent years many companies have moved away from that format to simply providing an overall limit of paid days off that the employee does not have to designate as being vacation, sick or other, and have called it “PTO.”
PTO has several pros – it treats employees like adults by giving them the discretion to use their time off as they deem appropriate, provides flexibility so that they can do things like take time off to take care for a sick child, and eliminates the need for the less honest employee to call in sick when the employee isn’t really sick at all.
The move to PTO also brought some cons. For example, a lot of companies give less overall time with the PTO model versus to former structure, and some employees opt to work while sick and then use all the PTO as extra vacation time. Still, Americans are notorious for not using all their paid time off.
Below is the average PTO according to a study done by Worldatwork in 2014:
- Less than one year of service: 16 days
- 1-2 years of service: 18 days
- 3-4 years of service: 19 days
- 5-6 years of service: 22 days
- 7-8 years of service: 23 days
- 9-10 years of service: 24 days
- 11-15 years of service: 26 days
- 16-19 years of service: 27 days
- 20+ years of service: 28 days
So, what is unlimited PTO? Some companies like GE, Glassdoor, and Dropbox have now abandoned the PTO structure and instead, offer unlimited PTO whereby employees can take as much time off as they want (with some conditions). To further explain, here are some pros and cons of unlimited PTO:
- Gives employees the flexibility to take care of themselves and their families.
- Productivity increases because employees can take needed time off to rest and relax.
- When an employee retires or quits, the company does not have to pay for unused vacation.
- Employees feel appreciated and in turn become more dedicated.
- It is easier to attract talent when the company is recruiting.
- Some employees may abuse the opportunity and not get their work done.
- Many employees take less time off for fear of garnering disapproval from the boss.
- There is more opportunity for vacations to overlap causing a temporary workforce shortage.
- The PTO may be more difficult to implement from a management standpoint.
- Manager expectations about PTO may not as clear.
In conclusion, unlimited vacation may be the new trend that brings many new opportunities and challenges. It will be interesting to see if it gains traction with most employers.