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Should you offer unlimited time off? 8 pros and cons

Unlimited time off helps companies demonstrate that they trust their employees, but disadvantages include workers deciding not to use their PTO. Learn more pros and cons.

Offering unlimited time off can help retain employees, but the benefit does come with some disadvantages, including the potential difficulty of implementing the program. HR leaders should work with other company leaders to consider whether the vacation option is right for their organization.

An unlimited time-off program could improve employee experience and helps company leaders show that they understand that employees' parenting or caretaking could benefit from vacation flexibility. However, employees may not take as much paid time off (PTO) if their company does not follow a "use it or lose it" policy, and the dividing line between sick leave and vacation may become difficult to discern.

Here are more unlimited time-off pros and cons to consider.

The pros of offering unlimited paid time off

An unlimited time-off program can offer companies various benefits in addition to the obvious advantages for employees. Here's how it can help organizations, as well as their workers.

Unlimited PTO offers employees more flexibility

Hybrid work schedules and remote work have become much more common, so many employees have grown used to flexible work time. Taking time off whenever they want fits this new view of work.

Shéy CobbShéy Cobb

"[Employees] want more autonomy and freedom," said Shéy Cobb, associate at Fisher Phillips, a law firm that specializes in labor and employment issues and is headquartered in Atlanta.

This increased autonomy may lead to higher retention rates, which translate into lower recruiting costs for organizations, Cobb said.

Employees likely have various demands on their time, including children and aging parents.

Rich FuerstenbergRich Fuerstenberg

"Unlimited [PTO] recognizes the diverse needs of the population," said Rich Fuerstenberg, senior partner of health at Mercer LLC, a professional services firm headquartered in New York. "[It] allows people to take their time off the way they want to and need to."

Unlimited PTO demonstrates confidence in employees

Giving employees unlimited time off is a good way for a company to potentially improve employee morale because leaders are demonstrating their belief that employees manage their time well.

Amy Felix-ReeseAmy Felix-Reese

Unlimited PTO makes employees feel like they're being treated like grown-ups, said Amy Felix-Reese, global COO at Leadership Circle, a leadership development and consulting firm located in Draper, Utah.

"They know that the company trusts them," Felix-Reese said.

Unlimited PTO may save HR time

An unlimited time-off policy likely saves HR staff time because they won't have to complete accrued vacation-related tasks.

An unlimited vacation policy means HR staff won't have to track employee vacation hours, Cobb said.

In addition, HR staff won't have to send out emails or other messages reminding employees to "use it or lose it."

The cons of offering unlimited paid time off

However, implementing an unlimited time-off program and executing it do come with challenges. HR leaders should consider some of these potential problems.

Employees may not use their unlimited PTO

While unlimited PTO seems like a win for employees, company leaders may need to encourage workers to use their time off.

Managers and other leaders should monitor who is using their unlimited PTO and encourage employees who aren't to schedule some vacation days, Cobb said.

Another option is setting a new rule.

Company leaders can require employees take a certain amount of time off to ensure they are using the program, Fuerstenberg said.

Managers may prevent employees from using unlimited PTO

While the company may offer unlimited time off, managers likely still control if an employee can take a particular day off. If managers reject requests, employees may not be able to schedule their vacation time.

While some managers may be generous and almost always approve a vacation request, others may not be so easygoing, Fuerstenberg said.

HR leaders should carefully examine employee vacation data to determine if certain managers are refusing too many vacation requests.

HR leaders usually examine company-level data when measuring time-off usage, Fuerstenberg said. They should look at the data in a more granular way and note if some departments aren't using their time off rather than just looking at positive companywide numbers and presuming the program is a success.

Transitioning to unlimited PTO can be difficult

If a company is switching from a system of employees accruing time off to unlimited time off for everyone, HR and other leaders at the company need to determine how the company accounts for existing employees' accrued vacation days.

One potential solution is effectively erasing employees' accrued time off and switching everyone to unlimited PTO starting on a specific day, Fuerstenberg said, but this strategy is usually unpopular with employees.

A better solution may be to pay employees for their accrued time and then switch over to unlimited PTO on a certain day.

"If you just cash everybody out, it's the easiest and cleanest approach," Fuerstenberg said. "But it's also expensive."

The line between paid sick leave and unlimited PTO can get murky

One potential problem that HR leaders should watch out for is employees or managers not distinguishing between sick leave and vacation time.

"When time off is related to a health event, employers may have certain reporting requirements," Fuerstenberg said.

Since a manager failing to report an employee's sick leave could expose the organization to risk, companies should make sure to maintain separate policies for paid sick leave and vacation time, Fuerstenberg said.

Hourly employees may object to the policy

Hourly employees usually aren't eligible for unlimited PTO, so an unlimited vacation policy for salaried workers may lead to resentment.

One potential way to attempt to address the problem is to create a time-off model for hourly workers that incorporates some flexible PTO, such as a few extra hours, Cobb said.

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