The discussion around unlimited paid time off (PTO) has gained momentum in recent months, as businesses bend and flex for better employee engagement. The advantages of offering employees more than they bargained for in terms of annual leave could be really tempting, especially at a time when organisations battle to attract and retain their best talent.
Let’s be honest, businesses that offer unlimited paid leave are seen as the ultimate holy grail in terms of business culture and employee benefits. It’s undeniable that, on paper, unlimited paid time off should drive a better work-life balance, and a culture of wellness at your organisation.
But HR leaders must delve a little deeper into the nitty gritty and look at the logistics of unlimited paid holidays with a critical eye. Is it all too good to be true? Does it work for your employees? Crucially, does it work in the interests of your business, and align with your values?
We explore how it all works and shine a light on the pros and cons of offering unlimited PTO.
How does unlimited PTO actually work?
Unlimited PTO is a framework where employees are not allocated a fixed number of paid days off at the beginning of the year. Instead, they are at liberty to claim time off as and when required. This approach offers substantial flexibility to employees, rewards hard work and loyalty, and helps to encourage rest, renewal and ultimately reduce work-related stress.
Getting the logistics right when offering unlimited paid leave can be a challenge. For example, there must be some caveats in place, so that teams can still function, and business operations can withstand the absences. Many companies have put in place some restrictions in terms of the time periods that employees can claim their leave and usually, this means staff are required to take their annual leave outside of their industry peak times and busy periods. Likewise, they might have to have first-come-first-served limitations in place, particularly in the case of small teams where multiple staff members absent would impact the day-to-day running of the team.
So, with so many necessary caveats and small-print stipulations in place, it begs the question; should we really be calling it ‘unlimited’ in the first place?
Here are some of the advantages of unlimited PTO:
The Perks
Talent acquisition
As businesses continue to compete to secure top-tier talent, offering unlimited paid time off is one of the many steps employers are taking to improve flexibility and employee satisfaction. As the likes of Microsoft, Netflix and LinkedIn continue to successfully implement unlimited PTO, other forward-thinking organisations follow suit in order to pique the interest of potential new candidates and retain talent.
Mental health and wellbeing
Allowing workers to take time off as and when they like means companies can often reduce sick leave, promote a better balance, and in many cases avoid the departure of valuable team members. When staff don’t have to fret about whether their remaining annual leave allowance will serve them in the case of an emergency or family commitments it can help workers feel empowered and accountable to work hard and manage their own workload.
In general, having the authority to judge for themselves how much time off is appropriate gives staff the sense of being trusted, valued, and respected as part of the organisation’s bigger picture.
Alleviates financial commitments
While many businesses have shied away from the idea of unlimited leave for fear that workers might abuse that freedom, in reality, workers with unlimited PTO tend to take the same amount, or less, than before. That also means that employers don’t need to pay out large amounts for unclaimed annual leave allowance which can accrue when staff resign. Without the traditional accrual of annual leave hours, businesses are not left with these hefty balances to compensate for.
The Pitfalls
The logistics can be complicated
Working out how to implement unlimited leave can be complex and really depends on your business and the industry you’re in. Calling the policy ‘unlimited’ can create friction if workers want the same week off, for example, or are asking for holiday time during your busiest periods. There may simply be times when you can’t grant workers that time off without it having a huge impact on your team or wider business operations.
It might not be all it’s cracked up to be
Studies have shown that contrary to what many business leaders might expect, workers with UPTO (unlimited paid time off) actually take less holiday, not more when they’re granted unlimited paid leave. If your culture doesn’t match up, you don’t communicate effectively, or even if workers still feel the peer pressure of what is deemed an ‘acceptable’ amount of time off, those shiny mental health and wellbeing benefits you expected could be null and void.
It could impact your culture and become unfair
What if your new recruits take full advantage of the unlimited leave, and those who’ve been working for you for years continue to work hard and claim the same amount of time off as before, out of a sense of loyalty? Some might love their newfound freedom, but others might feel cheated. What you’ll most likely find, is that the workers who are most disengaged or dissatisfied in their role, are the most likely to abuse the system, somewhat defeating the objective of implementing UPTO in the first place. HR leaders could be up against an unfair balance internally, and feelings of resentment further down the line.
Either way, if unpaid leave is something your business experiments with, it’s important to look at the data to see who, and how your teams and departments are taking advantage of their annual leave and evaluate and review the policy as needed. This additional monitoring in itself, could end up being pretty time consuming for your HR department.
Finding the right balance
It could be argued that having that numerical cap on your annual leave – while it feels restrictive sometimes, makes people more inclined to claim what they’re entitled to. Unlimited PTO, while it might seem like a great way to showcase your progressive ethos as an employer, you may not be doing your staff any favours by implementing it. In fact, you could be making life more difficult by blurring the boundaries and adding friction and extra administration for your line managers and HR team.
However, at a time when employees are seeking out workplaces with more flexible, more open workplace cultures, it’s worth finding your own way to give staff the time off they need. It could be worth experimenting with a trial period of unlimited paid time off to see if it aligns with your culture and values. But before taking the plunge, why not have a look at simply offering more annual leave days for your staff? Or come up with a scheme that rewards longevity, giving workers an extra annual leave day for every year of service, for example. Alternatively, you could check out how a four-day week might work for you and your team, giving staff the flexibility and freedom of regular 3-day weekends or a day during the week to work on passion projects and personal commitments.
There are a whole host of ways you can drive better staff engagement and offer the levels of flexibility your workforce craves.
Our friendly Strait Logics team are here to help you build the right benefits portfolio, unique to your workforce, and manage those benefits more effectively and efficiently. Take a tour of our employee benefits software today.
