Unlocking the benefits of unlimited PTO: A guide for employers

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Giant companies, including Netflix, Roku, Oracle, Morning Brew, and Asana, all have one thing in common: They each grant their employees unlimited paid time off (PTO).

Asana reports that 60% of their employees rate the unlimited PTO policy as the most important employment benefit[1] – and not the kind where you feel pressured not to take it, as one of their employees put it in their Glassdoor review.[2]

Unlimited PTO can be a great way to achieve better work-life balance, reduce burnout, and signal to motivated candidates that you’re a people-first company.

But not everyone calls the policy a dream come true.

For example, if a company has a glorified “hustle” culture where employees compete in “working the hardest,” taking a day off can be guilt-inducing.

Employees working in such environments end up using fewer vacation days and getting paid less.

So how do you set your unlimited PTO up for success?

No two ways about it: You educate yourself on the topic. We’ll explain the ins and outs of this policy to help you create a culture that supports unlimited PTO without it backfiring.

What is unlimited paid time off?

Unlimited PTO is a policy that allows employees to take a day off whenever they need to as long as it doesn’t impair their work or that of their team.

This benefit helps employees maintain their health, spend time with family, and have fulfilling lives outside of work while ensuring the job still gets done.

However, the term “unlimited PTO” begs the question: What does “unlimited” really mean?

What would be a “reasonable” degree of time for an employee to take advantage of it? What stops someone from taking every day off?

Unlimited time off is governed by policies, trust, and unwritten rules that make it not only realistic but highly beneficial for all parties in the right workplace culture.

How does unlimited PTO work in practice?

Don’t worry. Unlimited PTO doesn’t mean that employees can just up and leave whenever they feel like it.

Some conditions need to be met before the person is cleared for time off to ensure the business keeps running well and everyone still pulls their weight.

Typically, companies have a tool in place to track and streamline this process, and management or HR needs to approve an application for an employee to take vacation time.

So, here’s how the benefit works out in reality:

  • Employees can take time off any time as long as it’s clear what’s going on with their workload and how or when it’s getting done. For example, tasks can be done ahead of time or delegated if that’s not possible.

  • For major holidays (like Christmas and Thanksgiving), scheduling individual times in advance on a joined calendar and organizing the workloads prevents a full shutdown or uncompleted tasks.

  • The unlimited paid time off policy defines how much in advance an employee can request PTO, what criteria need to be met, and what the request/approval process looks like – filling a form and waiting for manager approval are commonplace.

The unwritten rules boil down to taking time off any time as long as:

  1. Your work is getting done, and the team isn’t affected

  2. You still communicate and show up frequently, so it doesn’t feel like you don’t work in the company

TestGorilla has an unlimited PTO policy.

Here’s how it works for our content marketing coordinator, Sheena.

When Sheena needs some time off, she double-checks that all freelancers have work to do so no tasks are lagging or compiling in her absence.

She uses an automated tool that enables people to update and move tasks along the process without waiting for approval.

This wouldn’t be possible if the policy were unclear on Sheena’s responsibilities before she goes on holiday.

It would also be hard to take time off if there wasn’t an understanding and trust that all the contributors could do their work well without Sheena constantly overseeing each part of the process.

This brings us to the caveat: Unlimited PTO is a win-win situation only in the right environment.

The pros and cons of unlimited PTO at a glance

Unlimited PTO has many benefits worth exploring. But, before you implement it in your organization, you need to know which obstacles you might run into and how to avoid or resolve them successfully.

Spoiler alert: Some of the downsides of unlimited PTO are not at all issues with the policy itself but rather with a company culture that’s incompatible with it.

Here’s a quick summary of all unlimited PTO pros and cons:

Pros

Universal cons

Cons in a toxic culture

Recruitment tool; Retention tool; Builds trust; Can boost morale and productivity; Can help you save money

Not applicable to all positions/companies; PTO can no longer be used as an additional benefit; No pay for accrual of days in case of a layoff (con for the laid-off employee)

Employees might take fewer holidays; Potential conflict between employees; PTO policy abuse

We’ll explain why and when each con happens so you can mitigate the risks.

But first, why exactly is unlimited PTO worth your attention in the first place?

The pros of unlimited PTO

pros of unlimited pto

1. It’s a strong recruitment tool

Unlimited paid time off is a signal of a healthy, people-first culture.

A MetLife study found that 72% of candidates want unlimited PTO and rank it as the benefit that interests them most when choosing an employer, making it a valuable recruitment tool.

Listing it as one of your employee benefits attracts talent like moths to a flame.

In a skill shortage and a market as competitive as this one, any way to improve your employer brand and grow your talent pool increases your chances of finding the right person for any job.

And when you do…

2. Resting when needed maintains retention

When workers take breaks regularly, it helps to reduce stress, prevent burnout, and foster a healthy work-life balance long-term.

pick your path

Source

A healthy culture around work and rest is essential to employee wellbeing and work satisfaction. It also makes sense from a business perspective:

  1. You want to have a positive culture where people don’t dread coming to work

  2. If you show your employees you care about their wellbeing, they will care more about your company and stay longer

  3. A sense of belonging at work increases employee performance by 56%

  4. Encouraging regular rest is more sustainable and affordable long-term than burning through employees and re-hiring constantly

The hustle culture is bad for everyone.

Employees can’t stay in a workplace that’s bad for their health even if they want to – and they don’t want to.

Unlimited PTO not only helps attract new talent but also helps you support and retain them longer.

3. Giving employees autonomy over their rest builds trust

It’s one thing to say you care, but showing it to employees in a measurable way is a whole other ball game.

You can achieve this easily by following your statement with unlimited paid time off to let employees focus on their mental health.

It’s on leadership to take the first step by doing things that genuinely benefit employees, such as implementing a four-day workweek policy and encouraging frequent time off.

If you model the same behavior by taking regular time off and talking a lot about it, employees will see that you mean it, follow your example, and start trusting you more.

4. Resting when needed boosts morale and productivity

Your best performers, unsurprisingly, are at their best when they’re well-rested and inspired.

Picture the work they can get done over the years they stick with your company because their energy is constantly replenished. This level of productivity more than makes up for the time they take off.

Everyone has peaks and ebbs – unlimited PTO can help you maximize your resource utilization by having employees work at their best times and rest when needed.

They will be happier and more productive, and you will get better outcomes.

5. It can help you save money on accrued holiday pay

Since unlimited PTO doesn’t count a set number of days, you don’t need to pay out employees for accrued holidays.

This saves you money and saves human resources time and energy on audits.

The odds are that employees won’t opt to take much more time off than they would have accrued anyway.

Imagine it like a candy store that once allowed employees a few pieces of candy at the end of each day. Every day, without fail, each employee would take some. They’re burnt out from work and hungry after being surrounded by it each day.

Then, when the management changes, the new owner allows employees to take a piece of candy whenever they want.

For the first week of this policy, the employees take advantage of it as much as they possibly can. They’re eating candy left and right whenever there’s a lull in business.

But after the first week, the employees have had their fill. They no longer crave it because it’s no longer a scarcity to them. Suddenly, the employees have begun taking less candy than they took home under the previous policy! 

The new owner ultimately saves money on resources while keeping their employees as happy as ever.

Analogy aside, giving employees flexibility over their time pays off more for both sides than the amount of time off they’re allowed.

The universal cons of unlimited PTO

These are the cons of unlimited PTO that happen even in healthy workplace environments where the policy is executed well.

1. It’s not applicable to all positions and companies

Call centers, manufacturing companies, healthcare, and retail are some examples where unlimited PTO doesn’t always work.

These are jobs where people need to be physically present and actively involved, or the work doesn’t get done.

Maybe…

  • The team depends on them

  • They’re directly facing customers in real-time

  • It’s not as easy to find a replacement on short notice

Furthermore, people who work in commission-based jobs earn less money when they take time off.

They might prefer to take overall less time off with an unlimited PTO and dislike the policy because they don’t get paid for the accrued days.

For such cases, you need to prepare alternative options, like offering flexible PTO instead.

In the case where an employee can “cap” their commission, granting them time off between then and when the cap is lifted could be optimal.

2. PTO can no longer be used as an additional benefit

To be clear, everyone deserves time off regardless of their performance at work.

That said, additional PTO past the standard allotment everyone gets can be a good reward because people can either use it or get paid extra. It works:

  • As an optional benefit for employees that really want it: Employees who don’t care about taking so much time off can choose something else that adds more value to their lives.

  • As a reward to loyal employees: Say you get an extra week off for every two years you’re at the company.

  • As a recruitment tool for senior employees: They might be skeptical of unlimited PTO because it’s hard to “get the job done” and leave their posts when their job is to manage and lead others.

You may have to find different ways to motivate or incentivize high performance and reward it in the future with unlimited PTO.

There’s a chance you won’t be able to apply the benefits across the board.

Consider leaving other benefit options on the table for workers who can’t leave their posts so easily or prefer something else.

As for rewarding loyalty and high performance, bonuses and a choice of future projects are meaningful alternatives to get the sentiment across.

3. There’s no pay for the accrued days in case of a layoff

This is a pro for the company but a con for the employee – they feel more financially insecure this way.

screenshot of a comment in LinkedIn about accrued days

Source

Having the accrued days paid can go a long way to sustain laid-off employees while they hunt for a new job.

But, not having to deal with PTO makes it easier on HR.

The cons of unlimited PTO in a toxic culture

These are not to be confused with universal unlimited PTO cons, as these aren’t problems with the policy itself but rather with the company and its execution.

These cons happen in toxic workplaces and can be detrimental to your unlimited PTO policy success. 

1. Employees might take fewer holidays

Imagine you need a break from work. 

You’re technically allowed to take time off whenever you need.

However, you know that your manager has their own way of estimating who’s skipping work for a justifiable reason – whenever someone doesn’t meet their criteria, it comes up on their performance review.

Or maybe the company has an established “grind culture” where employees compete in who’s working more.

This kind of environment can discourage employees from taking days off when they really need to, even when the policy is in place on paper.

As a result, they take even fewer days off than they would have if they had a set maximum limit, leading to stress, a poor work-life balance, and a greater risk of employee burnout.

2. Potential conflict might arise between employees

Employees who take more days off than their peers could be seen as slacking.

Those who rarely take days off could be antagonized if colleagues feel that it raises the bar for their requirements as well.

Employee conflicts arise in companies that don’t have a clear unlimited PTO policy or a strong and positive culture.

If the policy is unclear, everyone interprets it differently. And if the culture is already shaky and conflicts are common, adding unlimited PTO into the mix is like sprinkling a fire with gasoline – even in the best-case scenario, it doesn’t help.

3. There’s a chance for PTO policy abuse

Unlimited PTO policy abuse can take the form of:

  1. People repeatedly taking time off without making proper arrangements for their responsibilities or fulfilling the policy criteria

  2. Companies overloading employees with work, so they’re never able to meet the criteria for time off – bad with any holiday policy but even worse with unlimited PTO

A lot of employees feel that unlimited paid time off is a scam because employers can use it to make them work more without paying for accrued days.

It’s a fair point. More importantly, both policy abuse issues are up to the employer to solve.

If you’re offering unlimited PTO and removing accrued days from the pay equation, making it possible and easy to use this benefit should be a high priority. 

More on that shortly.

5 best practices for succeeding with unlimited PTO

Below are the steps to follow for better chances of reaping all the unlimited PTO benefits.

Best practices overview

Ahead of you:

  1. Create a transition period for the switch to unlimited PTO

  2. Check your employees are actually taking holidays

  3. Build a safe culture where employees aren’t afraid to ask for time off

  4. Build a clear unlimited PTO policy and communicate clearly to employees and managers

  5. Use a software tool to make requests and approvals super easy for your staff

1. Create a transition period for the switch to unlimited PTO

Some employees might be hesitant about the change of policy.

Here are some common reasons:

  • They’ve experienced or heard cautionary tales of unlimited PTO policy abuse

  • They don’t want more time off than they already have, and they prefer being paid for the days they don’t take

  • They have accrued days from before that they worry won’t be paid now

Don’t just flip the switch.

Help employees prepare and handle the change. You can answer their questions about unlimited PTO ahead of time and talk about any alternative benefits if this isn’t an option for them.

Make sure to compensate employees for past accrued holidays and start with a clean slate.

2. Check your employees are actually taking holidays

Track and analyze the situation.

If your employees take much less time off than they used to, it’s a red flag – what’s keeping them stuck at work?

As a prevention measure, you could add a minimum amount of holiday days rather than a maximum to set a fair baseline. Skillshare does this, and their employees on Glassdoor list the unlimited PTO policy as a perk.

You can also take inspiration from Zoom.

Zoom has an unlimited vacation policy called My-Time-Off on top of 11 paid holidays and seven sick days per year for salaried employees (and a “rich paid time off” policy for hourly employees in the US).

That said, the number of holidays taken is just an indicator of your status. It could point to a deeper issue with your company, which brings us to the next point.

unlimited PTO best practices

3. Build a safe culture where employees aren’t afraid to ask for time off

Unlimited PTO isn’t really unlimited if it comes with risks and too many conditions.

Judgment from peers and a never-ending pile of work waiting at the desk would make anyone feel like they can’t afford to skip a day, even if they need to.

But how do you establish a healthy culture where taking PTO doesn’t feel like a test?

Here are some pointers:

  • Keep communication going and assure employees they don’t have to pretend that everything is always fine

  • Have regular check-ins to see how people are doing and suggest time off when it makes sense

  • Ensure leadership is modeling the behavior by taking time off as needed so others can confidently follow suit

  • Appreciate employees when they share their needs or follow policy rules

  • Never use the taken PTO as a performance metric

  • If somebody broke the policy rules, be sure you’re highlighting that as the issue, not the employee’s PTO itself

  • Discourage any workplace toxicity and comparisons when you see them

Your employees, especially early hires, can help you set the right tone in the company.

Think about culture when you’re hiring. You should look for the right personality and soft skills, not just hard skills, for the job.

Hiring team players and culture adds instead of culture fits helps create a workplace environment where unlimited PTO works.

4. Build a clear unlimited PTO policy and communicate clearly to employees and managers

Unlimited PTO isn’t synonymous with the Wild West.

Set rules. What criteria need to be satisfied for an employee to take time off?

More specifically:

Elements to cover in your PTO policy

Examples

1. Announcement

How much ahead of time should the employee announce their time off?

2. Maximum limit to consecutive days

Is there a maximum limit to the number of consecutive days off?

3. Procedure

Who should be informed of the leave? Where do employees put in the date they’ll be away?

4. Workload management

Are there some arrangements employees need to make for their responsibilities? Is there an amount of work to complete before they take a holiday?

5. Time off specifications

Is all paid time off in the same bracket? Are there separate unlimited vacation and sick days policies?

6. PTO abuse

What counts as PTO abuse? What are the consequences?

Chances are, your employees want to comply with the rules.

As long as you give them all the information ahead of time, they can follow the steps without worrying whether they’re going to be in trouble for doing unlimited PTO wrong.

5. Use a software tool to make requests and approvals super easy for your staff

Software helps both with streamlining requests and approvals and keeping an eye out for policy abuse.

At the most basic level, you can have a form that employees need to complete and submit for approval that is also saved in the system.

This makes it easier to audit PTO later and see your company average as well as your extremes (most and least days off taken by employees), so you can address them.

Even better, a shared calendar where everyone can see when their teammates will be absent is another idea to help with organization and prevent misunderstandings like…

“Erica and I accidentally both took a day off this Friday because I thought she meant next Friday and assured her it was okay…so nobody was there when the client dropped by.”

Unlimited PTO requires a healthy company culture

When you implement the policy properly, and it fits your business needs, unlimited PTO is one of the most attractive and useful benefits your company could offer.

To implement unlimited PTO successfully, you need to prepare.

Start shaping a healthy and supportive workplace culture with custom pre-employment assessments by hiring candidates with the right priorities and skill sets.

If you need a hand with hiring, read about candidate screening best practices next.

Sources

  1. “Asana PTO”. (2023). Comparably. Retrieved February 9, 2023.  https://www.comparably.com/companies/asana/paid-time-off 

  2. “Asana Vacation & Paid Time Off”. (January 28, 2017.) Glassdoor. Retrieved February 9, 2023. https://www.glassdoor.co.uk/Benefits/Asana-Vacation-and-Paid-Time-Off-US-BNFT29\_E567443\_N1.htm

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