The pros and cons of unlimited paid time off

The American labor market has seen many changes in just the past two years. The Great Resignation has created a shortage of skilled workers, causing many companies to offer more unique benefits to attract top talent.  Workers, on the other hand, in a post-pandemic environment are favoring flexibility above other traditional incentives, as 60% of workers are considering changing jobs for more flexibility.

Because of this, companies offering unlimited paid time off (PTO) are on the rise as it’s a structure not universally implemented and allows workers the flexibility to take days off for parental duties, mental health, and more with no questions asked. According to a new study from job review site Glassdoor, mentions of “unlimited paid time off” are up 75% from pre-pandemic times.

However, there are pros and cons of unlimited PTO that all businesses need to consider. While companies like Netflix and Virgin have successfully implemented unlimited PTO others like CharlieHR found the practice ineffective, changing their leave policy shortly after enforcing it. 

So, will unlimited paid time off work for your business? Read on to see its pros and cons to decide.

How does unlimited paid time off work?

To know if unlimited paid time off is right for your company you first need to understand how it works. As opposed to a fixed vacation structure, with unlimited PTO an employee can take off as many days as needed throughout the year, and these days don’t belong to specific accrual categories.

Whereas some companies will offer specific days off for vacation, illness, bereavement, and more, unlimited PTO allows employees to use their time off as needed. This allows for workers to take as many days as required to recover from sickness, burnout, and emotional distress while also having time for vacation and being a parent.

Because these days cannot be accrued under an unlimited PTO structure, workers cannot be paid out for not taking vacation days. It is up to individual companies how to implement the process – managers can still be needed for approvals and days can still be denied if there are other colleagues with already approved leave for the requested period.

The pros of unlimited paid time off

1. It’s a great draw for candidates

While unlimited PTO has seen a surge in popularity, it still isn’t offered everywhere. In fact, a 2021 survey discovered that just 4% of American companies offer it. By including it as a benefit your job advertisements will stand out, helping draw in more candidates.

2. It will help retain current workers

Retaining current employees is integral to the success of a business. Companies know the high cost of employee turnover and training new staff, making retention a high priority. By offering more flexibility through unlimited PTO, current employees will avoid burnout and be able to achieve a better work-life balance – a major factor that causes employees to look for work elsewhere.

3. You don’t need to pay out unused vacation days

With traditional vacation structures that grant a certain number of vacation days, companies need to pay their workers for unused days off. However, a reason why unlimited PTO is good for businesses is that because vacation days aren’t numbered or guaranteed, they don’t need to be paid out when an employee quits. This reduces costs and saves companies money in the long run.

4. Workers take fewer days off

Contrary to what one may believe, the data shows that employees with unlimited PTO actually take fewer days off than those with traditional PTO plans. A 2017 study revealed that workers with traditional PTO plans take an average of 15 days off a year. Those with unlimited PTO plans take only 13 days off a year on average. This means there’ll be no loss of productivity with unlimited PTO.

The cons of unlimited paid time off

1. Workers don’t always use their time off

While workers taking fewer days off may be good for business, it can be bad for employees. Taking less vacation days can lead to burnout, causing workers to become less engaged in their jobs and eventually quit. If you decide to adopt an unlimited PTO structure, make sure to encourage employees to take time off to de-stress.

2. Managers might not embrace it

If your company already has an established PTO plan based on seniority, changing to an unlimited PTO plan may alienate management. Unlimited PTO puts everyone on an equal field, meaning an employee who started last week has just as much time off as a manager who’s been in your organization for twenty years, possibly leading to frustration and disengagement among your senior staff.

3. Switching may be complicated legally

When changing your PTO plan, you’ll need to keep federally mandated leave laws, such as those for family leave and medical leave, in mind. The Society for Human Resource Management recommends getting in touch with management attorneys to make sure your leave plan covers obligations laid out by the Family and Medical Leave Act. 

4. Unlimited days puts pressure on employees

It’s already known that workers with unlimited PTO take fewer days off. One reason for this is that the onus for deciding how many days to take is on the employee themselves. A worker might feel if they take too many days off that they could be seen as “lazy” or passed up for promotions and better career opportunities. Others can see it as a competition to see who can take the least number of days and use this as a bargaining tool for salary raises.

Are you looking to implement unlimited paid time off or other innovative incentives to attract the best candidates? Adecco is here to help. We’ll advise you on the best ways to appeal and retain top talent based on thorough research and years of field experience. Click here to read our latest research, the Global Workforce of the Future: Unravelling the Talent Conundrum, to see what exactly job seekers are looking for, or contact us to speak directly with one of our workforce experts.