A combination of factors, including the switch to fully remote, hybrid, and flexible work configurations during the COVID-19 pandemic, have caused more job seekers to prioritize work-life balance as they consider new job opportunities. With benefits and perks trends simultaneously shifting towards more company health & wellness initiatives, unlimited paid time off (PTO) has also emerged as a popular benefit and alternative to traditional “capped” PTO.
While there are many upsides to unlimited PTO, it’s important to consider all of the factors that apply to your industry, business structure, workforce, and company culture before making a switch from limited PTO. In this article, we’ll explore how unlimited PTO differs from limited PTO and how to evaluate whether it’s a sustainable advantage for your business to support talent acquisition, hiring, employee retention and employee well-being.
Traditional or Limited PTO: Pros and Cons
Some companies continue to offer limited or traditional PTO, which offers a set number of vacation and sick days to all employees – sometimes with variations or levels based on seniority or position within the company. While the number of sick days available to employees is usually dictated by state law, limits to vacation days are typically set by the employer.
By using a limited or traditional approach, it is possible to use PTO as an incentive for job advancement. Likewise, when permitted by state law, employers can leverage limited PTO to compel employees to take much-needed time off based on any “use it or lose it” policies that are in place. This is particularly important as some studies have found that employees with unlimited PTO use less vacation days than those with limited PTO. Although this might be perceived as advantageous for employers, this lack of utilization could actually be the source of lowered productivity, including the risk of burnout.
Employers should also bear in mind that limited PTO is optimal for certain industries and impractical for others. In certain fields like healthcare, retail, contracted services, and manufacturing, or in companies where seasonal workloads shift significantly or long-term projects are the norm, unlimited PTO could adversely impact business. Meanwhile, unlimited PTO is becoming increasingly common among tech industry businesses and other business types where increased flexibility and employee autonomy can be leveraged to improve productivity.
The most obvious downside of limited PTO is the lack of flexibility and the risk of causing your employees to feel constrained, overworked, or bound to use their PTO within set and unaccommodating parameters. Whether an employee would prefer to use their PTO outside of a major holiday, or take additional days to grieve the loss of a loved one, limited PTO can reduce the sense that your company prioritizes the well-being of its employees and remains adaptive to the evolving needs of its employees.
Unlimited PTO: Pros and Cons & When to Consider a New Policy
Unlimited PTO is gaining in popularity as a benefit offering among prospective hires and existing employees. For job seekers and those who are currently employed, unlimited PTO is perceived as a benefit that demonstrates a company’s investment in the well-being of its employees, even when that requires increased flexibility and understanding on the part of the organization itself.
Work-life balance is paramount to employees across industries, especially in the midst of economic recession and residual challenges of the COVID-19 pandemic. Many HR experts argue that unlimited PTO improves employee retention, increases productivity, boosts employee satisfaction (and engagement), and strengthens company reputation and culture. Above all, it grants employees peace of mind that when they need to request time off for vacation, sick leave, or other personal reasons, they can rely on the support of their employer.
It’s important for any employer considering unlimited PTO as a new benefit to realize that unlimited PTO still utilizes a number of agreed-upon parameters. For instance, PTO requests will still require manager approval and your company is entitled to establish required protocols and timelines for submitting PTO requests in order to properly manage/modify scheduling and practice responsible workforce management.
Unlimited PTO includes the inherent risk of employees who could try to take advantage of company policy, but with the right policies and a strong company culture in place, this is unlikely to occur. On a compliance-based and regulatory level, shifting from limited to unlimited PTO can mean navigating complicated local, state, and especially federal leave laws (FMLA among them), but if this change unfolds with the help of qualified HR experts, it is a manageable and eventually advantageous move.
Establishing an Unlimited PTO Policy
Remember that unlimited PTO only fundamentally differs from traditional PTO in that it doesn’t “cap” available days off and doesn’t differentiate between vacation, sick leave, or personal leave. Nevertheless, managing the transition to unlimited PTO can be a challenging process at first, so here are our main tips for establishing a new policy:
- Require managerial approval of all PTO requests. Some companies even include multi-layered approval, preventing one manager from individually processing all requests.
- Evaluate PTO utilization quarterly (or even more frequently in the early stages of implementation). Leave room for revisions to your company policy as needed.
- Clearly articulate your PTO policy in the employee handbook and during the hiring process. This should include a clear indication of how employees should submit PTO requests, the required timeline for requests, and a rundown of the approval process. Depending on your business, you might also limit the number of consecutive days an employee can take off, or require that certain productivity benchmarks be met before granting approval.
- Review all applicable labor laws in your business jurisdiction(s) and inform your employees of their rights. City, county, and state laws can vary significantly in terms of PTO policy, whether it’s related to PTO accrual, PTO minimum usage, or termination/separation protocols. Ensuring that your payroll, scheduling, and HR processes are accurately documented and easily accessible can make it much easier to resolve issues in the event of employee PTO overuse or another dispute.
Optimize PTO, Benefits, and Payroll with Cello HR
Transforming your PTO policy to improve talent acquisition and employee satisfaction is a beneficial but complex process. That’s why Cello HR offers comprehensive HR consulting paired with software and expertise that optimizes your payroll, benefits administration, scheduling, HCM and more. Ready to upgrade your PTO policy and benefits to attract and retain high-performing candidates? Contact us today to tell us about your goals.