31 May All About Unlimited PTO
It might sound like something included in a benefits package alongside nap lounges and smoothie bars, but offering your employees unlimited PTO is not only totally doable, it could have a really positive impact on your organization and culture.
So what is “Unlimited PTO”?
Unlimited Paid Time Off (PTO) allows fully paid leave for whatever an employee may need without providing a specific number of days as an allowance. Paid leave for vacation, bereavement, sickness, or any personal reason would not be capped as long as it does not interfere with an employee’s performance, engagement, or ability to satisfactorily complete their work.
Unlimited PTO does not mean the employee doesn’t show up for work at will if they have nothing to do. The policy simply avoids putting a hard cap on the amount of time the employee can take in a given year.
Many organizations that utilize unlimited PTO embrace and enjoy the policy. Abuse is much rarer than expected as employees value the benefit. However, there are challenges as managers may need to focus less on the number of PTO days an employee takes per year and focus more on expectations, productivity, and accountability. Outcomes, rather than the calendar, become the PTO equation.
What are the pros?
Unlimited PTO incentivizes employees to make the most of their time at the office. When they have the ability to take time off when they need it, the days off actually allow employees to relax and relieve stress. While PTO is often thought of concerning vacation days, it also commonly includes paid sick days. With unlimited PTO, employees can take the time they need to get healthy versus coming to work sick.
If this policy isn’t allowed to be abused by employees, it can actually save money in the long run. Because employees aren’t accruing time off, there is no need to consider pay out of unused time at the end of employment (check your state laws for compliance on this aspect). This policy could also save your December: if you don’t rollover PTO at the end of the year, employees may all rush to use their days in December, making it harder to accommodate their requests without significant stress to remaining staff members and supervisors.
Unlimited PTO can also positively affect your culture: Because unlimited PTO policies rely on coordination between management and employees to ensure work is completed, it helps to foster communication among staff. It also shows employees you trust them to manage their own time off. Organizations already using Unlimited PTO found their employees actually take the same or less time off. One organization reported an average usage of about 22 days a year over an 8 year period, which is close to the amount most employees would generally get with a formalized policy.
What about the cons?
Because Unlimited PTO isn’t a widely held practice at this time, managers may not have a clear framework to approve or deny requests. In fact, if your leadership doesn’t fully understand and utilize healthy amounts of time off, employees may not feel they are actually able to use the Unlimited PTO without repercussions or judgment. Some employees may even end up taking less than the standard “accrued” time, as they feel uncomfortable declaring their work is done and their schedule is free.
For employees with accrued PTO, the implementation of Unlimited PTO and subsequently not receiving a PTO payout at termination or the end of the year (again, check your state laws on this) may feel like the loss of a possible severance package or financial benefit. Some states actually have special payout requirements for employers who offer unlimited PTO or sick leave requirements that make a separate sick leave policy necessary. In either of these instances, tracking time off may be required, not optional.
What are some best practices?
Before you implement an Unlimited PTO policy, clearly communicate performance expectations to all employees to prevent abuse. In many cases, the real problems with over usage come down to a few unproductive employees and these cases should be considered a performance issue rather than PTO usage issue. Establish clear expectations for performance through job descriptions and performance reviews so that all parties are on the same page before PTO even factors in. Also, determine any boundaries you do want to add. For example, will Pastors be held to a maximum number of Sundays off? Are there any dates you want to blackout for all staff?
When you introduce the policy, we recommend calling it “Personalized PTO” or “Flexible PTO” instead of Unlimited PTO. The intent is for it to be a personalized benefit that meets the needs of each employee. The term “unlimited” may imply managers could not deny PTO requests which would create a hardship on operations. After implementing, continue to track each employee’s PTO. It’s still important to know usage by employees, teams, and departments (and some states may require it). Also provide Short- and Long-Term Disability insurance to reduce the financial strain to the organization on an “unlimited paid leave” policy and will likely pay off in the long run.
While Unlimited PTO may not be the right fit with every organization’s culture, we encourage you to explore the option.
Original content by HR Ministry Solutions. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.