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Is Unlimited PTO a Good Idea?

If you’re debating whether or not to offer unlimited paid time off to your workforce, there are a few pros and cons to keep in mind.

For starters, it is becoming more prevalent. The number of jobs on Indeed that advertise unlimited PTO increased 178% between 2015 and 2019. But still, only 1%-2% of companies in the U.S. offer unlimited vacation and most of those companies are in the tech industry (ex. Hubspot, Netflix, Roku), according to Society for Human Resource Management.

Why Do Companies Offer Unlimited PTO?

Offering unlimited vacation is an innovative tactic for recruiting talent. Afterall, who hasn’t daydreamed of taking off work whenever the mood suits? In fact, the 2019 MetLife Employee Benefit Trends Survey revealed that 72% of employees are interested in unlimited paid time off. The desire for unlimited PTO ranked highest of the emerging benefits, beating phased retirement programs, paid sabbaticals and wellness programs that reward healthy behavior.

Today, nearly 75% of workers have access to paid vacations. The average amount is 14 days after one year of service and 24 days at 20 years according to the Department of Labor.

But unlimited paid time off isn’t a perk that’s offered everywhere, and it can help attract the right employees for the job. New hires appreciate not having to wait to accrue PTO, which can make employees more engaged right off the bat.

It also frees up some time for HR by eliminating the tedious task of formally tracking absences. And, with an unlimited PTO policy, employers no longer have to pay for unused vacation days if employees quit or get fired.

The novelty of offering unlimited vacation can be a game changer. It makes your organization stand out to prospective hires, it can improve the time-to-fill job openings, boost employee morale, rejuvenate productivity, reduce employee burnout and increase the trust level between employee and employer.

How to Start an Unlimited Vacation Policy

It’s smart to have a plan when implementing an unlimited PTO policy. First, be prepared to pay employees for any unused PTO before you make the switch. This will help diminish anyone with accrued vacation time from feeling slighted.

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Second, it’s critical that employers communicate clear expectations from the beginning regarding how it’s going to work, scheduling procedures, etc. Your workforce needs to understand that just because there’s unlimited PTO doesn’t mean everyone can take off for the entire summer.

The company culture also needs to be one where company leaders spend time encouraging employees to use vacation days. If upper management doesn’t lead by example, sometimes employees feel guilty for taking vacation and may even compete to prove who is most “loyal” to the company by NOT taking any amount of time off.

Human resources is the bridge between company policy and execution and should always be looking for ways to make the company culture employee focused. Unlimited PTO is a great start, but also consider other employee-centric policies such as flexibility in scheduling, remote work, programs that reward healthy behavior (smoking cessation, weight loss, pregnancy 101), phased retirement programs.

For more insights on how big a difference benefits make, check out our latest findings in The HR Playbook: Reduce Turnover with Employee Benefits. And for more information on how Paycor’s technology can help optimize your HR process, visit our Solution Finder.


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