How does unlimited PTO work? A guide for employers
Unlimited paid time off (PTO) puts employees in the driver’s seat over how much time away from work they can request. This increasingly popular employee benefit—offered by 8% of US companies—has the potential to improve wellbeing and productivity while giving employees more flexibility over their vacation schedules.
But “unlimited” PTO is a bit of a misnomer. It doesn’t mean employees have carte blanche to take unlimited vacation. And while the perk can be a helpful recruiting tool, when poorly implemented, it can lead to confusion over allowable PTO, inequities in vacation times across the company, and an “always-on” culture where employees are implicitly encouraged to stay online and take less time off.
This guide will dispel common misconceptions about unlimited PTO, explain how it works, and help companies implement a thoughtful policy that encourages employees to find the right balance between taking their well-deserved time off and meeting their work obligations.
What is unlimited PTO?
Unlimited PTO is a company policy that allows employees to request as much PTO as they’d like, so long as they fulfill all their work responsibilities. This approach differs from conventional PTO policies, which allot a fixed number of paid vacation days, personal days, sick leave, or floating holidays for employees to take annually. With unlimited PTO, there’s no hard cap, giving employees more flexibility in how much time away they can request.
How does unlimited PTO work?
Unlimited PTO does not typically mean employees can take PTO whenever they want within a moment’s notice. It does, however, let employees request (not necessarily take) an unrestricted number of days off.
Managers either approve or deny these requests at their own discretion. Before green-lighting unlimited PTO, managers typically make sure their employees have reliably gotten past work done, haven’t already taken an excessive number of vacation days in the past year, and aren’t leaving their teams too short staffed during busy work cycles.
This approach to PTO is based upon mutual trust, respect, and accountability between employers and their workforce. For unlimited PTO to work fairly and efficiently across an organization, companies need to implement a policy that specifies how far in advance employees need to request time off. They should also establish clear approval criteria for managers
How to implement unlimited PTO
Unlimited PTO can mean different things for different workforces. Since the policy can be easy to misinterpret, you want to be careful about how you’re communicating it to employees. Here’s how to implement unlimited PTO in ways that benefit workforces and employees alike.
Step 1: Assess company culture and readiness
A common criticism of unlimited PTO is that companies offer it to attract talent, only for new employees to encounter a competitive culture where team members feel pressured to work and avoid taking excessive days off.
Your time off policy shouldn’t dissuade employees from enjoying well-earned vacation time. On the flipside, you don’t want employees to overdo it with PTO requests and cause the organization to suffer productivity hits from being understaffed.
Before considering going the unlimited route, evaluate whether there’s a culture of trust between employees, managers, and company leaders about teams fulfilling work demands. And bear in mind that a cutthroat, keeping-up-with-the-Joneses work environment may mean employees take fewer days of unlimited PTO, which could negatively impact employee wellbeing.
Step 2: Define clear guidelines and expectations
A murky unlimited PTO policy can confuse employees and their managers, causing misalignments about requests, approvals, and allowable numbers of annual days off.
So be clear about your policy! Make sure employees know how far in advance they need to request vacation, establish an approval process that helps managers navigate whether to grant time off amid potential conflicts, and make sure you’re complying with state-specific time off requirements whenever they apply.
You should also consider adding some constraints to the policy. Think about setting a minimum amount of annual time off employees need to take to make sure they unplug from work. You can also limit how many successive days off employees can take at a time—for instance, capping it at two concurrent weeks—to ensure teams are properly staffed year round.
Step 3: Communicate the policy to employees
Make sure your workforce knows the ins and outs of your unlimited PTO policy. Consider publishing the policy in your company intranet, holding information sessions where employees can ask questions, and emphasizing that employees should feel empowered to request time off as long as they’re on top of their work and not overdoing it. And in the event an employee’s request for PTO gets denied, make sure managers are transparent about why.
Step 4: Train managers to support and enforce the policy
As mentioned, unlimited PTO approvals are at the discretion of managers, who need to balance team productivity with their employees’ needs to step away from work. Make sure managers are equipped to handle this tightrope walk.
Also, without the right controls, there can be massive inconsistencies in how much PTO employees take—both within and across teams. Make sure managers oversee a fair, consistent approval process. You should also try to avoid situations where one team member who only takes a few days off is spread thin from constantly covering for a colleague who takes weeks.
Unlimited PTO pros and cons
Is unlimited PTO right for your workforce? Consider the biggest perks and disadvantages below before deciding.
Advantages of unlimited PTO policy
An unlimited PTO policy can recruit stellar employees who can take more control over their schedule, potentially boosting their productivity.
Improve work-life balance
Do you care more about how many hours your employees work or the quality of their product? Unlimited PTO rewards the latter by allowing employees who reliably fulfill all their work responsibilities to take vacation or personal days, without worrying about a dwindling amount of available time off. This can improve employee engagement and protect team members against burnout.
Attract talent
Stellar talent wants to work for companies that prioritize employee wellbeing. Unlimited PTO policies can suggest you’re empowering team members to maintain a healthy work life balance, which can be a competitive recruiting advantage. In fact, 70% of workers like the idea of unlimited PTO.
Cost savings
PTO is a business expense in the US, which doesn’t federally require companies to offer any paid vacation. And many states require companies to pay out any unused accrued PTO after employees leave, meaning businesses have to carry it as a liability on their balance sheet. But since employees can request PTO whenever they’d like under the unlimited model, there’s no accrued vacation to cash out, meaning businesses can save money.
Productivity gains
Unlimited PTO can help reward outstanding performance. If employees know they can take PTO as long as they’re fulfilling their work duties, they may strive to make better use of their time on the clock. In turn, they’ll have guaranteed leisure off the clock, which can improve their personal wellbeing and professional productivity.
Cons of unlimited PTO
Unlimited PTO can also have its downsides.
Inconsistent usage across teams
Some managers may be more lenient about approving unlimited PTO requests than others. And some employees may only want to take a week off a year, while others aim for four or five weeks. Because of this, unlimited PTO policies often lead to an inequitable allotment of vacation days across your company, where there’s a huge chasm between employees testing the upper limits of what’s allowed and those forsaking vacation altogether.
Planning challenges
Without a hard cap on the amount of PTO employees get, managers may find it difficult to stagger vacation schedules to make sure they don’t get too understaffed. To avoid the confusion and potential ambiguity of unlimited PTO, many companies instead offer flexible PTO (also known as FTO) schemes that set limits on the number of days employees can request.
Potentially burdensome for colleagues
Employees who take more time off than the company average may add on to their colleagues’ workloads. Also, as the decision-makers over which requests get approved, managers may feel that company leadership is shirking the responsibility of PTO policy and putting it on them who, by denying requests, may breed resentment within teams.
Difficulties in tracking and accountability
One of the potential pitfalls of an unlimited PTO policy is tracking it across your workforce. Without a hard cap on allowable vacation or personal days, it can be tricky to gain visibility over who’s taking time off when. Look for HR and benefits administration solutions that make it easy to manage out-of-office statuses company wide.
Also keep in mind that without guardrails in place, employees may misuse an unlimited PTO policy. Companies can falter in their end of the bargain by first offering unlimited PTO, then constantly deny requests because work is busier than anticipated. Younger, entry-level employees without families may also feel implicit pressure to seldom take PTO, letting company leadership off the hook in giving employees opportunities to recharge. A clear unlimited PTO policy can mitigate these issues.
Should your company offer unlimited paid time off?
While unlimited PTO has the potential to attract talent and promote a healthier work-life balance for employees, it’s not the right policy for every business.
Companies should emphasize the importance of employees taking time away from the office to rest and recharge. If you implement unlimited PTO into a cutthroat culture where employees sparingly take time off, workplace morale may suffer. You also want to make sure there’s a sense of mutual trust and accountability between employees and their managers, so that employees only take time away when appropriate and don’t misuse the unlimited PTO policy.
If you do go the unlimited PTO route, make sure your policy is both clear and fair. Have ironclad rules for how far out employees need to request time, consistent approval criteria across departments, and ballpark parameters for too little and too much annual PTO so you can ensure every employee stays within the boundaries. You also want buy-in from both employees and their managers. And company leaders need to set examples for what good use of the unlimited PTO policy looks like in practice.
Ultimately, unlimited PTO policies are more effective when company leaders view them less as a recruiting tactic and more as a way to improve employee wellness without sacrificing productivity. Before committing, make sure your business is up to the task.
Manage employee PTO with Rippling
Rippling allows companies to effortlessly manage their employees’ PTO—no matter your policy. With the platform’s HRIS, employees can route time off approval requests to managers, who can quickly track PTO schedules across their team. And leadership can assess trends companywide to tailor PTO policies that strike the perfect balance between employee wellbeing and productivity.
You can also tee up a PTO usage report from a pre-set template that helps you quickly gauge how much vacation employees are taking. And if you’re unsure whether you want to implement unlimited PTO or go with a more conventional approach, Rippling can provide access to expert HR advisors who can assess your readiness for different offerings.
Frequently asked questions
Is unlimited PTO really unlimited?
Not typically. Under unlimited PTO policies, employees can usually request as much time off as they’d like, but approval depends on whether the employee is on top of their work, how much PTO they’ve already taken, and how busy the company is. Many companies with an “unlimited” PTO policy have unofficial caps on how much vacation employees can take.
Does unlimited PTO include sick days?
Unlimited PTO policies often include sick days. Instead of specifying between vacation, personal days, and sick days, many unlimited policies let employees request generic PTO to use however they’d like.
That said, in the US, 18 states and DC have some sort of requirement for offering employees sick pay. Some states also have their own PTO laws that distinguish sick leave from vacation and personal days.
How many days can you actually take off with unlimited PTO?
It depends on the company. While there’s no hard and fast rule, the Society of Human Resource Management (SHRM) reported that most businesses with unlimited PTO policies impose unofficial caps of between three and six weeks of time away.
Is unlimited PTO a trap?
Employees at some companies with unlimited PTO end up taking less vacation than average. And ambiguous PTO policies can create confusion about how much time off is allowed, which can potentially create an “always-on” work culture that muddies boundaries between work and personal life and leads to burnout. Also, companies don’t have to pay out unused PTO under the unlimited model. Businesses should be aware of unlimited PTO’s potential downsides and use the approach to emphasize employee rest and wellbeing instead of a lipservice recruiting tactic.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
