A man leans back in a chair with his hands behind his head and looks through a floor-to-ceiling window at a sprawling cityscape. At the man's left is a sleek modern desk with a laptop sitting abandoned.
Everyone needs a break, and studies show that time off from work can greatly benefit both employees and the companies they work for. — Getty Images/Chinnapong

Unlimited paid time off is a benefit that’s growing in popularity. A 2019 Metlife survey found that unlimited PTO was the top emerging benefit that interested those employees surveyed; 72% of participants responded favorably to this benefit. Companies like Hubspot, Dropbox and GE all offer some version of unlimited or open paid time off, meaning that these companies don’t track employee vacation days and allow employees as much vacation time as they need.

Unlimited PTO has the potential to help employees stay motivated, work productively and build loyalty to their employer. If you’re considering offering unlimited paid time off, here are some pros and cons to factor into your decision.

Unlimited PTO isn’t really unlimited

As the Society of Human Resources Management notes, unlimited paid time off is more of a concept than a practicality. “Unlimited vacation policies do not, in fact, allow employees to take an unlimited amount of time off. It's more of a marketing tool for recruiting talent than a literal interpretation of vacation policy,” wrote SHRM.

Unlimited PTO may not be realistic, but the spirit of it is what’s important. Offering this benefit signals to your employees that you trust them to get their work done and take time off to recharge as needed. It shows that your management philosophy strives away from micromanagement. The message that unlimited PTO sends is that you are flexible to accommodate when an employee needs a day away while trusting that employees will respect your expectations.

So, what is the limit on how much time an employee can feasibly take off? That depends on the employee. Companies that do offer unlimited PTO informally cap it at six weeks, or 40 days per year. But, if an employee is underperforming while taking lots of vacation days, the vacation allowance may need to be reevaluated.

Unlimited PTO can cut down on your admin

Unlimited paid time off sounds expensive, right? In reality, offering this perk can save your business money. By offering unlimited PTO, your business can cut down on administrative costs, capture higher employee productivity and avoid costs associated with employee turnover.

“Because companies usually aren’t obligated to pay employees for a set number of vacation days, there’s no need to pay them for unused days at the end of the year or when they leave the company,” wrote Indeed.

Likewise, HR no longer has to track and police accrued vacation time for each employee. By some estimates, this can save 52 hours per year in administrative time — time that can be used more productively.

Unlimited vacation policies do not, in fact, allow employees to take an unlimited amount of time off.

Joanne Sammer, the Society of Human Resources Management

Research also shows that time off can help employees work more productively, inevitably benefitting your business in the long run. “When employees take vacations, it increases their productivity, provides greater job satisfaction, reduces their stress levels, leads to a better night’s sleep and benefits cardiovascular health by aiding in the prevention of heart disease,” reported Norwich University.

[Read more: 7 Wellness Benefits You Can Offer Employees]

Just because you offer unlimited PTO, however, doesn’t mean your employees will take advantage of it. You must actively encourage your team to take time when they need it.

Unlimited PTO requires strong communication

Unlimited paid time off does require some oversight. While you may not track the number of vacation days someone is using during the year, you will want to track when your employees are out of office. Establish an approval process for employees who need more than a day here or there — such as if someone is planning a two-week vacation during school holidays, for example.

Creating an approval process enables managers to ensure work is covered at all times. Communicate to your team that your approvals process is meant to avoid project delays, prevent understaffing and ensure work coverage while someone is out. Offer a way for employees to coordinate shift coverage amongst themselves if your business operates with that type of schedule. This allows employees to find the flexibility they need to work best.

[Read more: 7 Inexpensive Perks and Benefits to Offer Your Employees]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published February 16, 2022