Payroll

Unrestricting the Limits: The Ins and Outs of Unlimited PTO

July 19, 2018

Unlimited PTO is becoming more popular for large well-known companies. Learn the reasons why and if your company should join in offering this benefit.

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It’s been a long past few weeks for your employees. The sales force met sales goals, or at least the pipelines look solid (no sandbagging there!), and calendars are booked with an appropriate number of appointments to keep prospecting in order.

Ditch the stress with Unlimited PTO

Account management teams are fully staffed, and
workloads are finally evenly distributed.

They are great at shifting responsibility if someone is out, and their appreciation for teamwork is evident.

They’ve worked hard, and you recognize that they could benefit from a little break (heck, even you—the boss—could use a little R&R!). Sure, they’ve got the weekend, but why doesn’t it feel like enough? You’ve seen the vacation schedule, and you know that their three weeks of PTO is already accounted for: one week of vacation for the annual summer trips, one week for the holidays in December, and the remaining days divided among doctor’s appointments and other personal business needs.

Those three weeks are gone before they are even in the bank. What would be so wrong with offering unlimited PTO to these incredible humans you’ve invested so much into?

Robin Hood, PTO (Prince of Time Off)

Before diving into your dream of selflessly offering unlimited PTO to every employee listed on your payroll (you are envisioning yourself clad in tights, speaking in a Celtic accent, and rewarding the peasant workers with as many days off as their hearts desire), it is first important to understand the difference between vacation and PTO.

PTO vs. Vacation

While you might already feel savvy with your payroll vernacular, these two terms are often used interchangeably in conversation.   However, they do require a bit more detail for the sake of clarity where payroll and accruals are concerned.

Sick Time, Vacation Time, or Unlimited PTO?

PTO stands for Paid Time Off, and is often used as an umbrella term for general time an employee would be absent from work. Vacation is one of the many components of PTO. For example, an employee could take PTO for a vacation. An employee could also take PTO for an illness, or a personal emergency.

Some companies, however, choose to break down their PTO into compartments (in fact, this might be something you are doing). They might give an employee 3 weeks of PTO, but the time is broken into 2 weeks of vacation and one week of sick time, as an example.

Why one over the other?

The essential difference is that some companies wish to specify how the time off is to be used. Others simply offer PTO as a package to be used at one’s own discretion.

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Why might a company provide PTO, but compartmentalized? Arguably for the reporting factor; if a company offers compartmentalized PTO, they can see that an employee took six of his vacation and four of his sick days last year. Ultimately it helps the employer see how PTO is being utilized.

Another reason a company might choose to compartmentalize PTO is in order to staff appropriately. Essential employees (those in customer service and/or on an assembly line)must be present for business operations to continue.

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In many cases, vacation time requires at least two weeks’ notice on the calendar. Sick time on the other hand, is planned in advance or taken spontaneously.

Time Out to Consider Time Off

According to studies, many companies are moving away from traditional compartmentalized vacation/sick/personal accruals and tracking, and turning to PTO. Employees can call out on a moment’s notice, and with little explanation, as long as they have sufficient PTO time in the bank.

While the downside might be the removal of the company’s ability to have transparency into the way employees are spending their PTO, the upside is that the employees might feel less apprehensive about taking the time they need when they need it. They are not obligated to explain their reasons for needing to take time away from work (does anyone really want to let their boss know it’s time for a prostate exam?).

And let’s be honest, building employee morale is key to employee satisfaction and retention, which often results in a more productive workforce, and ideally higher profits (that’s right—cha-ching!).

Join the Party

So, is it a pipedream to envision allowing an employee to take time off as needed, rather than allotting time in a rigid, Big-Brother-like manner?

Join the Unlimited PTO Party

As a matter of fact, the idea of limitless PTO is not so far-fetched. There are many large companies that offer their employees unlimited vacation and/or PTO, as part of their benefits package. According to an article in USA Today (Frohlich, 2015), there are at least seven prominent companies offering just that. These companies include GE, Grant Thornton, Grubhub, Netflix, LinkedIn, Virgin Group, and Hubspot. While these companies may be much more prominent than your business, many of them have gained such notoriety for the perks they offer to employees.

That said, it doesn’t hurt to give a little in order to get a little more in return. Being forward-thinking where benefits are concerned is a good way to give.

The Good, the Bad, and the Unlimited

As with any rebellious idea, there will be pros and cons. So let’s start with the bad: What is the downside of unlimited PTO?

Bad News First

Unlimited PTO 5First of all, as mentioned before, there is a lack of transparency in how employees are spending their time off. Companies love reporting and analytics, and in employee matters, no less. Employers want to know the ratio between Joe’s time off due to illness versus his time off for vacation. Employers want to try to find a correlation between Joe’s job performance and satisfaction in conjunction with the amount of time off he uses, and for which purposes.

Second of all, determining which employees are eligible for unlimited PTO might be problematic. Fairness is a subjective concept, and assigning unlimited PTO to titles or pay-grades could be a tricky task.

Last of all, there is the fear of abuse of the policy. This is a reasonable fear, of course, as there will always be employees who take advantage of a generous policy, which ends up costing the company money.

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Now for the Good

Now for the good: What is the upside of unlimited PTO? For starters, what’s not to love?

Simply the perception of being able to take as much time as you need to manage life has mental and emotional benefits—not only for employees, but also for employers. Employers nowadays need to have a competitive edge in order to appeal to top candidates for hire. Offering unlimited PTO is something that can certainly make a company appear more relevant in the current job market.

Next, employees worry less about taking time off because they don’t feel obligated to divulge personal activities.

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Finally, there’s speculation that employees typically take nearly the same amount of time off, whether it’s set or unlimited.

Good employees understand that it is necessary for them to spend a reasonable amount of time present and working in order to produce the results that a company expects of them, and abusing the unlimited PTO policy would undermine that concept, and potentially jeopardize their employment.

To Be or Not to Be (Unlimited)

The takeaway here is that times are changing, and employees have more options to consider.

Time off is an important factor in the hiring process and in employee satisfaction and retention. For this reason, employers are becoming increasingly mindful about the trending desires of employees. Employers also want to appear as employee-centric, which helps attract talented employees and gives the company a good name.

If  your own company’s PTO policy is unsatisfactory, perhaps it’s worth considering how unlimited PTO would fit into your company’s culture. Do you feel your current employees would be able to responsibly transition from their current PTO offering? If not, is there a way that you could roll out unlimited PTO in phases (for example, offer it to employees who have been working for the company for a minimum number of years)? Do you feel offering unlimited PTO could bolster your appeal to future employees during the scouting and hiring process?

Unlimited PTO means Happy dedicated employees

If you feel unlimited PTO could be beneficial for employees and company alike, this could be a turning point for your company. There could be many smiling, refreshed faces on a more regular basis as you scan your sea of employees.

Speaking of seas and unlimited PTO, now is a good time to start thinking about that Caribbean vacation for yourself. Just saying.


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