Who wouldn’t like unlimited leaves; a working system wherein one can take as many leaves as one can, as long as no deadlines are breached and no projects are put on hold. Unlimited Paid time offs or PTO is a culture which is dreamed by many but achieved by a few. Not only is it a less stressful work culture, but also contributes towards better employee productivity owing to improved mental health. It also saves on the costs of accruing paid leaves which organizations may otherwise have to pay to the exiting employees.
The culture of unlimited PTO is enticing for sure. However, one should know the long and short of it before implementing it in the organization. In this complete guide, we will be talking about PTO meaning, PTO vs vacation, vacation policy template, how organizations across the globe are implementing the policy successfully, and much more.
What is unlimited PTO?
Let’s start off with the basics by defining PTO. Unlimited PTO refers to leave policy where employees can take as many leaves as they want, whether for sickness or for leisure. While it may be a polarizing concept, unlimited PTO is a great way to attract a younger and more dynamic workforce which believes in the adage of ‘work hard, party harder,’ and wish to strike a balance between work and life.
An organization instituting unlimited time off is propagating a culture of trust where the employees are treated like adults and expected to behave in a prudent manner when taking time off; while acknowledging that not everyone needs the same amount of time off.
However, it is important to know all about unlimited paid time off policies before implementing one in the organization. There are various factors that come into play here, apart from the usual features, pros, and cons. The strength of the organization, the industry to which it belongs, the audience which it caters to; these are also some of the factors which need to be taken into account.
Unlimited PTO, in the end, may work for some businesses and may not work for others. You have to gauge which category your organization falls into.
Why offer unlimited PTO to employees?
You know what is unlimited paid time off. The second most important question that arises is, why to offer it to the employees. What are the benefits that it will entail to the organization
Following are some reasons that are put in favour of unlimited PTO:
- Performance: Unlimited PTO attracts new high-performance employees. The prospect of taking leaves whenever they want is attractive.
- Productivity: This also leads to an increase in the productivity of existing employees. Unlimited PTO contributes towards a stress-free life, thus resulting in better work quality.
- Engagement: Unlimited time off leads to a happier workforce which results in better employee engagement.
- Innovation: A happier and better-engaged team of employees is known to be more innovative. Hence, ideas flow better and are executed in a better manner.
- Team culture: A highly-motivated and engaged workforce creates excellent teams that work unitedly towards uplifting the organization and achieving its collective goals.
- Cost-saving: Unlimited time off work policies usually end up proving to be a huge cost-saving asset for the organization. This is due to the fact that traditional vacation policies often result in accrued time offs at the end of the year or even when the employee is leaving. In the case of unlimited PTO, organizations save up on all that cost.
Unlimited PTO days can have a positive effect on productivity. However, that depends on a lot of factors and how well the organization can create a policy which can sync in well with its scale and the nature of business.
Employer concerns about unlimited PTO
Unlimited PTO is good on paper and garners many benefits. However, when it comes to implementing it practically, there are a lot of hurdles that come through.
The most interesting fact is that while unlimited PTO is often encouraged in the name of increasing productivity and positive work culture, that’s where its cons stem from. Unlimited PTO, practically, often leads to chaos and confusion, both being an anti to productivity and positive work culture.
Let’s take a look at the factors which are not in favour of unlimited PTO policies:
Abuse of policy
Unlimited time off policy often leads to an inherent abuse by the employees. There can be unnecessary leave extensions and vacation overlaps on which the management may have little to no say owing to company policies. Further, it may also lead to poor management if the manager is the one taking too many leaves. In the absence of proper guidance, the team will perform poorly. Further, the absence of too many employees may lead to confusion and disarray in work affairs with too many instructions getting lost in translation.
Lack of baseline (how many is too many)
Another con of unlimited PTO is that there is no definitive parameter for employers to actually judge how much leave is too much leave. It is not possible for them to gauge where to pull the stops when it comes to employees availing too many leaves as a part of the policy. Further, the lack of a proper holiday structure can lead to a certain set of employees not taking leaves in the quest to move ahead professionally. This, in turn, may often lead to too many continuous working days, further causing fatigue and burnout-like situations.
No motivation quotient
In a well-structured vacation policy, employees look forward to holidays, whether paid or incentive-based ones. However, no such factor exists in an unlimited PTO policy. As a result, the motivation quotient that comes with the leaves is gone. When someone gets incentives for free, the value decreases. Same is the case of unlimited PTO.
Unlimited PTO is a recent development. Older and bigger organizations often have traditional vacation structures and moving to unlimited PTO structures can often be a disruptive process. Further, the bigger the size of the organization, the more difficult it becomes.
Implementing unlimited PTO is where the real challenge lies. It is also the stage where most policies become stagnant because of the challenges therein. Thus, in an ideal world, while an unlimited PTO may be a desirable policy, it is not a practical one.
Vacation or unlimited paid time off (PTO) policy template
A good vacation policy should be clear and concise. It should also clearly explain the limitations to the otherwise unlimited PTO policy and the method in which the time off work can be cashed in.
It is to be noted that mutual trust between employee and employer is important while creating and further availing unlimited time off. Take a look at the following vacation policy template to understand better.
Purpose of the policy
Our unlimited PTO policy is designed to give employees the liberty to avail as many leaves as they need as long as they fulfil their duties. They need to rest and have a life outside of work. High levels of productivity can only stem from a relaxed and happy mind.
The basis of this policy is the mutual trust that exists between the employer and the employee.
Scope of the policy
This policy applies to all full-time and part-time employees of the organization.
Elements of the policy
There is no limit on the PTO employees can avail. However, the policy does establish a minimum level of time off.
All the employees are required to take [x] number of days off each year to relieve themselves of work-related stress. Bonuses can be offered to encourage taking time off work. To discourage overwork, employees will not be eligible for these incentives and bonuses if they don’t avail the minimum time off that has been recommended.
All vacation time will be tracked to ensure employees follow the same.
There is no accrual of time off. Thus, the organization does not owe any dues for unused leave.
Please note that this policy does not interfere with the terms and conditions for other policies such as maternity leave and paternity leave. This policy is for leaves over and above these.
Terms and conditions
This policy is based on mutual trust. Thus, employees are obliged under the same for the following:
- Avoid any abuse of the policy by taking time off that reflects negatively on work and impacts the organization in a negative manner
- Ensure there is effective communication in place within the team so that there are no overlapped vacations
- Notify the managers at least two weeks in advance
- Create plans regarding projects that will be handled by other members of the team
Please note that time off of one week does not need prior approval. Any request for time off which is over one week requires approval from the supervisors, who can reject the leave, in the following instances:
- Other team members availing leave at the same time
- The time period being extremely busy and crucial for the company’s business
- A suspicion of abuse of the policy by the employee
However, employees should note that they cannot be denied leave by the supervisors on account of discipline, malice, non-urgent work, and to approve the request of an employee who came after you did.
Note that the above-mentioned policy is not exhaustive in nature. It will be reviewed half-yearly and updated, as deemed fit. However, the best way to make it work is by establishing effective communication and inherent trust among all the parties involved; manager, subordinate, teams.
Which are the companies with an unlimited vacation or PTO policy?
Now that you have understood the gist of how an unlimited PTO works, the best way to garner confidence about implementing the same is by way of citing real examples.
Here are the companies with unlimited PTO. They have effectively implemented the unlimited vacation policy and are reaping the benefits thereof.
- Evernote: Evernote has the most exciting way of encouraging their employees to take time off. They offer a whopping travel stipend of $1000 to encourage their employees to visit someplace new and get their minds off work.
- Sony Electronics: Sony Electronics has a no accrual-based system for all their exempt employees. They encourage this policy of unlimited PTO because they believe innovation stems from a clear and relaxed mind rather than an overworked one.
- HubSpot: Now comes the meatiest one. HubSpot just doesn’t believe in giving unlimited vacation, it believes in giving its employees a chance to develop themselves holistically. The company offers a whopping $5000 per year for education completion, a comprehensive dental and health insurance, a retirement savings plan, and of course, an unlimited PTO. What’s not to love?
- Dropbox: Dropbox has a vacation policy which covers all types of leaves; from new parent leave to family vacation leaves and sick leaves, there’s everything for everyone.
Is unlimited PTO really required?
If you know how to curate it best in your organization and policies, then yes, it is required. Unlimited time off work policy or unlimited vacation policy or simply unlimited PTO ensures your employees work at their full capacity when they can and tune off when they have to instead of providing substandard work.
Your employees need to be at the top of their game if you need to claim the top spot in the industry. However, the biggest hurdle in the implementation of unlimited PTO is basic human nature itself. When offered for free, vacations lose their charm and when left on trust, professional relationships are often abused. Therefore, while thinking of unlimited PTO is great, executing it takes time, effort, and quite a few changes within the organization.
Another thing to consider is how managers are keeping a tab on the unlimited time off and ensuring that there are no leave clashes that affect work. Human Resource too should be careful while assessing that employees do not take less time off in the quest to work more.
Research shows that unlimited PTO often leads to employees taking less time off which can lead to burnout situations and lesser productivity. At AttendanceBot we have witnessed that and made sure we solve the situation by recommending to take these breaks.
All in all, unlimited PTO is only good when there is clear sync between managers, subordinates, and HR, which should further be in sync with the organization’s goals. Otherwise, there are chances of it creating more chaos than calm.
Has your company implemented an unlimited PTO policy or are you thinking of creating one? Do connect with us on @HarmonizeHQ and tell us about it.