Companies love to advertise unlimited PTO policies on their careers pages, but some employees argue that in actuality, employees end up taking far fewer days because they don’t have clear guidelines.
And while it’s a good selling point, moving to unlimited PTO is complicated and requires policy decisions and buy-in across the entire company.
A clearer balance sheet — eventually
Companies that provide a limited number of days off to employees will end up carrying unused PTO days on their balance sheets, according to Rajeev Kapur, CEO of 1105 Media, a B2B media and marketing services company. Those days can add up to a financial liability in the near term, which might convince some companies to convert to an unlimited PTO policy. But in order to clear that balance sheet, employees need to be paid for days off they haven’t used yet.
“Your balance sheet has to be strong to move to unlimited PTO,” says Kapur. “Cash has to go out first,” to pay for those accrued days. It’s a big initial investment, but if you’re in a financial position to do it, you should also consider the policy implications of the move.
Unlimited can’t exist without guardrails
According to Kapur, “No one takes unlimited PTO, because if you do, you get fired. You either cause more work for other members of your team, or the company realizes they don’t need you — and you get downsized.” Kapur says that employees who need to take extended time off or want to work fewer days out of the week should look into taking a sabbatical or a leave of absence or discuss going part-time with their employer.
These are often the fears of workers who rely on the good graces of their manager and need to feel like they are contributing in a significant way to stay in their jobs: If I take more time off to care for myself and my family, I’ll be punished.
Full-time work comes with full-time benefits like health care, which most US full-time employees purchase through their employers. But many employees have realized that the stress of the pandemic, child care, and reduced work-life balance due to the stresses of suddenly working remotely are leading to burnout. And under unclear unlimited PTO policies, many employees can feel stressed about when they can and cannot take off — which in turn increases burnout.
Clear policies can relieve pressure on employees
Pagely, a managed WordPress hosting company recently acquired by GoDaddy, enforces lower limits on PTO.
Danielle Tabor, SHRM-SCP, who oversees HR and culture at Emburse, a global fintech firm that offers unlimited PTO suggests building policies that support taking the right amount of PTO to do their best work. She says companies should “emphasize that the amount of vacation taken during the year will not be factored into any promotion, raise, or other decisions.”
Tabor says that HR should set minimum limits and ensure managers and individual contributors are aware of the average days of PTO taken. “On top of this, make sure your HR team is conducting a regular audit of PTO taken. At Emburse, we run reports quarterly to understand who the outliers are in both extremes and meet with their managers to discuss how to best approach the situation.”
You may need different policies for different locations
Tabor also cautions that multinational companies need to keep in mind varying federal requirements in different jurisdictions. “Most other countries, especially in western Europe, already have far more vacation allowances than the US – often 4-6 weeks – and quite often these are government-mandated. There’s also a much different culture of people taking all of their vacation days. You’ll need to decide if these countries will also get unlimited days, and if not, how you will share this message with employees.” Documented policies with clear guidelines and references to local laws will help clear up any confusion.
PTO cannot be the only measure of productivity
While it’s easy to accuse the employee who takes a lot of PTO of taking advantage of the policy, managers should attempt to understand the employee’s individual situation in light of that data. Document PTO — and really all — policies in your HR software where all employees can access them, track employee performance toward goals, and take an empathetic look at what the data tells you about the employee’s time with the company. Don’t be afraid to change your policies in ways that better support your employees.