Unlimited PTO is a paid time-off policy that allows employees to take as much time off work as they want, rather than assigning them a fixed number of available days off each year. This policy gives workers lots of flexibility and autonomy. But it also assumes they are fulfilling their work responsibilities and meeting the demands of the business.
What Is Unlimited PTO?
Unlimited PTO is a workplace leave policy that allows employees to request as much paid time off from work as they want — as long as it doesn’t hinder their productivity or interfere with business operations.
While unlimited PTO is a popular perk in the tech sector, other industries have been slow to adopt it. The Society for Human Resources Management’s 2023 Employee Benefit Survey showed that only eight percent of companies that offer paid time off have an unlimited PTO policy. Though that may be ticking upward.
“What we’re seeing is that more and more employers, albeit slowly, are looking at this as a viable option to help with the flexibility and agility required by employees,” Jim Link, chief human resources officer at SHRM, told Built In.
And while unlimited paid time off may sound like a dream perk for employees, the data shows that workers with unlimited PTO plans don’t take much more PTO than their peers. According to a 2022 survey by HR software company Namely, employees with unlimited PTO took an average of 12.1 days off each year, while their peers with traditional plans took 11.4 days off.
That’s why the success of an unlimited PTO policy hinges upon a well-crafted policy and a company culture that values work-life balance.
How Does Unlimited PTO Work?
An unlimited PTO policy doesn’t mean workers can take off work whenever they want, or as long as they want, or without notifying their manager. These policies come with rules, even if those rules are often unwritten.
PTO requests need to be approved by a manager, and they may be denied if it’s during a busy time of year or too many team members have already requested off. A manager might also have a talk with an employee if they are requesting too much time, especially if it’s interfering with their productivity or business operations.
Unlimited PTO policies sometimes come with guidelines that tell employees how much notice is required for a PTO request and how many consecutive weeks off they can schedule at a time.
Like traditional PTO plans, unlimited PTO also comes with some strings attached. Employees who request off will likely be asked to develop a plan to make sure the business runs smoothly in their absence. That may mean putting in a little extra work before or after their vacation.
Some companies with unlimited PTO policies track how much PTO is used to gain insights about their workforce, but other companies may not track PTO usage at all. SHRM’s Link suggests companies track PTO through their HR software just like they would with a traditional PTO arrangement to ensure employees aren’t taking advantage of the policy, underutilizing their PTO or taking off at the same time as other employees.
As a best practice, leaders who adopt unlimited PTO policies should encourage employees to use their PTO by setting a minimum usage requirement and leading by example. Harry Gottlieb, founder of Jellyvision and Jackbox Games, wrote that employees were initially afraid to take time off until they saw him and other executives unplug during vacation.
Why Do Some Companies Offer Unlimited PTO?
Companies may offer unlimited PTO as a perk that appeals to employees who want more flexibility, making for a happier workforce and a boost in employee retention. Additionally, companies that offer unlimited PTO often use it as a recruiting tool to bring in interested job candidates. They also may offer it to avoid having to pay out unused vacation time to employees at the end of the calendar year or to employees who leave the company.
Pros of Unlimited PTO
Gives Employees More Flexibility
With unlimited PTO, companies give workers more flexibility than if they told them how much time to take off. It’s a policy designed to meet the needs of workers.
If an employee is given two weeks of vacation under a traditional PTO plan, for example, they may plan ahead and book that time for vacations. However, if their relatives unexpectedly visit from out of town or a friend invites them to a weekday baseball game, they won’t have enough PTO days left to take time off work. An unlimited PTO policy would give a worker in this situation the flexibility to adjust to unexpected circumstances.
“When you have that flexibility, it’s like a weight off your shoulders,” Danielle Tabor, chief people officer at fintech company Emburse, told Built In. “You know that the organization has your back if you’ve got something that you need to tend to.”
Builds Trust Between Companies and Employees
Employers that offer unlimited PTO plans trust their employees to do what they have to do to get their job done. In exchange, employees know they will be able to get time off work when they need it.
Jess Elmquist, chief human resources officer at HR software company Phenom, said unlimited PTO is rooted in trust, which can help drive employee engagement.
“Instead of that paternal mentality of organizations, we’re now actually thinking about it more in a peer-oriented, communal situation where we’re asking everyone to take responsibility for their own productivity,” Elmquist said.
When employees take ownership of their job responsibilities, they learn how to be more efficient and productive with their time. This can also inspire teams to value results over the amount of time spent in the office.
Appeals to Job Seekers
Unlimited PTO is seen as a perk that can help companies gain the edge in a battle for top talent. The benefit is generally popular with all generations, but is most popular with Millennials, according to a 2019 Metlife survey. Workers who participated in the survey ranked unlimited PTO as the emerging benefit that interested them the most.
Glassdoor, a website that allows employees to review their workplace, found that the number of reviews mentioning unlimited PTO policies increased 75 percent from 2019 to 2022, and 88 percent of those reviews characterized the benefit as a positive attribute.
Saves Companies Money
Companies that offer traditional paid vacation typically have to account for each employee’s accrued vacation days. That’s because several states require those days to be paid out when an employee leaves the company.
This is not a small financial liability. A 2015 economic analysis of 114 public companies calculated that employees were owed an average of $1,898 in accrued paid time off. In total these companies have an estimated $224 billion in PTO liabilities. When companies switch to an unlimited PTO plan, they can erase that liability from their books and free up those funds for other purposes.
Cons of Unlimited PTO
Employees Might Take Too Little Time Off
Some workers feel like they can’t take PTO because they are too behind on their work, or they feel guilty taking off work because they don’t see other team members taking vacation. Employees could worry that taking too much PTO would make them look lazy, while those with the least PTO are seen as more dedicated.
Some employees prefer the certainty of traditional PTO policies, which often encourage employees to use their remaining PTO days before the end of the year.
Molly George, CEO of public relations firm Kickstand, found that she took “substantially less” time off when she worked at a company with unlimited PTO.
“You almost had to ask permission to take time off,” she said. “Whereas I think there’s a different mentality if you are given 20 days of PTO, for example. That’s part of my compensation package. I feel more confident in taking that time off because it’s allotted to me.”
Employees Might Take Too Much Time Off
One of the primary concerns employers have about unlimited PTO is the potential for abuse — an employee who pushes the perk to its extreme limits.
If an employee were to abuse the policy and request a disproportionate amount of PTO, Tabor said she would talk with the employee to see if there is something else going on in their personal life that might qualify for other leave policies, like family leave or caregiver leave.
If a worker is not hitting their goals and requesting too much PTO, Elmquist sees that as an opportunity to try to understand what is causing the employee to disengage and to give them tools to grow as a professional.
Leads to Unclear and Inconsistent Expectations
The lack of structure in an unlimited PTO policy can “unleash the beast” in a team dynamic, according to a 2022 study in Frontiers in Psychology.
“An endless number of vacation days means that employees have no guidance on how much leave is appropriate,” the study argued. “When no formal rules exist, employees will look for informal rules communicated by their supervisor or team members.”
This is one of the reasons why Facet, a developer hiring platform, switched from an unlimited PTO policy to an accrued PTO policy in 2019. In announcing the policy change, Facet CEO Robert Sweeney said unlimited PTO was a “scam” for employees.
“Instead of no vacation policy,” Sweeney wrote, “you end up with hundreds of different vacation policies, one for every manager, and none of them openly communicated.”
NO PTO PAYOUT
Some jobs — including many government jobs — pay employees a specified amount for each unused vacation day because those days are part of their total compensation package. Some states like California, New York and Illinois require employers to pay out unused PTO to employees who leave the company. In both cases, these employees would be losing money if their employers switched to an unlimited PTO policy.
By taking away the monetary value of PTO days, unlimited PTO transforms the benefit from “an individual trading good into a collective good” that may be driving some employees’ hesitancy to take time off, according to the Frontiers in Psychology study.
COMPLIANCE ISSUES
While unlimited PTO can ease some administrative burdens by eliminating PTO tracking and payouts, employers will still need to consider how their policy will comply with the labor laws in multiple states and countries.
Some countries require a minimum amount of PTO and other types of leave. In the U.S., companies that combine sick leave, family leave and other leave benefits under the unlimited PTO umbrella should know which states require employers to offer paid family leave, for example, and adjust their policy accordingly.
Several states also require companies to document accrued unused sick time, which may or may not be included under a company’s unlimited PTO umbrella. In California, employers are required to provide one hour of paid sick leave for every 30 hours worked.
Employers also have to be mindful of federal leave policies like FMLA. Workers cannot, for instance, use unlimited PTO for a reason that is covered by FMLA.
Frequently Asked Questions
How does unlimited PTO work?
Unlimited PTO allows workers to take as much time off as they need, as long as their time off doesn’t impede their productivity or business operations. Employees still need to request time off in advance, and their manager may deny the request if it’s deemed excessive or if the team is understaffed.
Is unlimited PTO worth it?
Unlimited PTO plans are popular with workers who value flexibility and autonomy, but some may prefer to have certainty about the benefits available to them and to receive a payout if they leave the company without using all their allotted vacation days. In general, employees with unlimited PTO plans take roughly the same amount of PTO as employees with traditional accrued PTO plans.
Is unlimited PTO a red flag?
Unlimited PTO is seen by some as a red flag, but the success of a PTO plan is highly dependent on the expectations at each company. Companies with unlimited PTO plans can encourage employees to use their PTO by setting minimum PTO requirements, modeling PTO usage by senior leaders and making work-life balance a part of the company culture
Is unlimited PTO really unlimited?
Unlimited PTO policies don't have a specific cap on how much vacation time an employee can take, but it can still come with certain rules for when and how to take time off.
Companies offering unlimited PTO may allow employees to take time off as needed if they have completed their necessary work. Although, PTO requests under the policy may still be denied during busy times of the year, if multiple employees have also requested time off or if an employee has requested too much time off.
