STACKER — You may have heard of the elusive idea of unlimited PTO, but what exactly does it mean?
Unlimited PTO is an approach many companies are taking that allows employees to manage how much time is needed for their own vacation and personal time as long as they stay on top of their work. The key is that employers don’t put a cap on time off and don’t require a definition for why a worker is out.
Both employees and employers have been found to benefit from unlimited PTO. Workers across all generations cited unlimited PTO as a top reason for starting a new job, according to a February 2022 survey. Research from the job platform Indeed reveals unlimited PTO policies rose 178% between 2015 and 2019—a huge leap, even before the COVID-19 pandemic spurred the Great Resignation.
Properly using vacation time can improve performance
Employees who have unlimited PTO programs are more likely to report having a healthy work-life balance, according to a survey by Joblist. The survey found that 62% of employees with unlimited PTO reported having a good balance with work and personal life, and 58% reported high satisfaction with their jobs.
“Being in control of your own schedule and able to take time off when needed alleviates the stress behind balancing home and work,” Perrow said. “It also leads to better communication and planning to ensure proper coverage.”
Taking time off from work also means taking time to step back and refresh from the heavy workloads. Vacations away from work yielded more benefits the longer employees were away from their desks, with health and well-being peaking at eight days into their time off. Employees then resumed work more refreshed than when they left.
Unlimited PTO can save 52 hours in administrative time
As attractive as unlimited PTO may be to employees, it holds perks for employers as well. Among those topping the list include higher productivity, engagement, and loyalty.
According to Jennifer Perrow, a small business growth consultant at Perrow Advisory Services, employee engagement is critical in a work environment. “When an employee feels seen and respected, there’s more incentive to be engaged in part of the team,” she said. “Employees are also reluctant to leave a company that gives them so much control over their time.”
Unlimited PTO can also save businesses money. Tracking unused vacation time that can be rolled over and banked can rack up administrative time. When exploring how this differs for companies that offer unlimited PTO, approximately 52 hours of administrative time can be saved a year. Additionally, an unlimited PTO structure decreases the year-end push of “use it or lose it” vacation time.
There are other advantages too. When the job board Indeed switched to unlimited PTO, they were able to attract new employees, expand offices, and boost monthly visitors to its website.
Unlimited PTO can be a big draw for recruitment and employee retention
As the U.S. workforce grapples with what “business as usual” means, many companies are reexamining various aspects of employment and office culture. Among these is a move to hybrid work, a mix of remote and in-office hours. How is unlimited PTO viewed in this mix by employees when taking team cohesion into consideration?
As people continue to find the best fits for their lives amid the Great Resignation, flexible scheduling remained at the very top of a list of what workers want most, according to a Harris Poll survey from February 2022. Flexible scheduling folds into the want for unlimited time off policies, which 65% of survey employee respondents said they looked for when considering leaving a company for another. https://c76f02b185dbb88a6b904c45bc650baf.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
Unlimited PTO isn’t actually ‘unlimited’
A common misconception about unlimited paid time off is that it is the equivalent of endless vacation days. Employees can use PTO in a variety of ways, from taking a family member to the doctor or taking a child to a school function. But companies should set a clear policy that outlines exactly what it is and how it’s used.
“Employees not familiar with unlimited PTO may freeze up and not use it, or, because they don’t have a clear understanding of what it is, abuse it,” Perrow said. “As with other areas of the business, managers need to make PTO expectations clear, and provide the right support to employees who can live up to the company’s expectations surrounding PTO.”
Employers should start with a request process and emphasize that PTO must still go through approvals. Set up communication requirements between all team members, including how the workload will be handled during an absence. Encourage all team members to use their PTO so no one feels their work time is taken for granted or PTO is neglected. Also make it clear that when an unlimited PTO policy is in place, there will be no bank of vacation days that require pay-offs when someone leaves a job.
Setting minimum vacation days may be the answer
When the tech company Buffer started seeing issues with its unlimited PTO policy, it looked for solutions. As the company’s employees weren’t taking enough vacation days, Buffer required employees to take a minimum number of vacation days. The target: three weeks per year. The hope: employees would up their time off to at least 15-20 days of vacation time. Their results: an average increase of 18.2 days. To accomplish this, the company’s executives led by example, and “gentle reminders” to take vacation time were regularly sent out.
A Harvard Business Review article cites decades of research that concludes that “the greatest competitive advantage in the modern economy is a positive and engaged brain,” and insists, “To be truly engaged at work, your brain needs periodic breaks to gain fresh perspective and energy.”
Timetastic compiled a list of six facts and statistics about unlimited PTO, using research from numerous sources, including the Society for Human Resource Management and Justworks, to gain perspective on the use of PTO focusing on perks, drawbacks, and, of course, peace of mind.