Though just 1-2% of companies offer unlimited paid time off (PTO), it has quickly become one of the most popular benefits in the modern workplace, with companies like Netflix, LinkedIn, and General Electric getting lots of buzz around their unlimited policies. However, employees dazzled by its promise might not know the more employer-centric origin of unlimited PTO plans.
In states where accrued vacation days are required to be paid out, it creates a gray area in terms of defining how many days have indeed been “accrued” when PTO is unlimited.
With U.S. businesses holding $272 billion worth of unused vacation liability, some have started to rethink conditions that encourage workers to use up their time off.
Even as more companies adopt unlimited vacation policies, it turns out that there is little effect on actual vacation days used: at companies with unlimited plans, employees on average only take about one more day off per year than companies with limited plans. Depending on how an unlimited PTO policy is put into practice, it often benefits employers more than the employees who seem to be its biggest proponents.
So why are employees so excited by the idea of unlimited vacation? With the right practice in place, unlimited vacation can remove stress around accruing time off, using up days before the end of the year, or trying to fit personal time into a rigid “X days a year” framework. Unlimited vacation can also boost company morale and productivity by trusting employees with the responsibility of managing their own time. 84% of managers agree that workers show increased focus and creativity after taking time off.
While unlimited PTO can come with pros and cons for both employers and employees, there is a strategic way to maximize the benefits of an unlimited policy for everyone. Here are some best practices for a successful unlimited time off policy:
Understand Your Motives
While unlimited PTO can benefit an employer in several ways, it’s most effective when the employee’s best interest is put front-and-center. Companies that have successfully implemented unlimited vacation policies are those who genuinely want to see employees take meaningful time off. Encouraging a healthier work-life balance will benefit both parties by increasing employee morale and productivity.
Companies that encourage hard-working employees to take the time off that they deserve will also increase employee loyalty and retention. Trusting employees with the responsibility to build their own time-off schedule nurtures a culture of trust, goodwill, and mutual respect. A company that shows a genuine interest in employee well-being and happiness motivates these employees to work harder.
Inspire Employees’ Work Ethic
Though some employers fear that employees will take advantage of unlimited time off, it is more often the case that employees about the same amount of time than they would if they had a set number of vacation days.
Unlimited vacation is increasingly common among tech startup companies. Startups, widely known for long hours and skipped lunch breaks, often facilitate a company culture that rewards employees for being the first one in and last to leave. In these naturally competitive work environments, employees feel compelled to compete with their peers for hours clocked.
Employees work hardest when they care about a company that cares for them. Working long hours for the sake of proving value is not sustainable and doesn’t contribute to productivity. To avoid this pitfall, success within a company should be clearly defined by quality of work, rather than face time.
Managers and leadership teams should establish concrete goals and an open line of feedback with their reports. Measuring employee value in terms of accomplishments, rather than time spent in the office, can contribute to a culture where employees feel like they deserve and can enjoy their time off. With this mindset, employees and managers alike can encourage healthy work-life balance practices.
Company culture can help shape the boundaries of unlimited PTO, but the specifics of these boundaries are often ambiguous. Employees frequently fall into a trap of taking less vacation than they deserve because they don’t know where to draw the line between acceptable and excessive. An open dialogue about expectations and needs between employer and employee can create more transparency around unlimited vacation.
Including guidelines for the policy in your company handbook (like setting a cap on consecutive days out of office, for example) gives employees a better sense of where to draw the line. Several companies have also customized their unlimited vacation policies to encourage employees to actually use their days, such as mandated vacation, travel stipends, and even a monthly vacation raffle. Early on, managers should establish best practices and work closely with employees to make sure they feel comfortable requesting time off.
Unlimited PTO works best when employers and employees keep each other in mind. This establishes a company culture that encourages both good work ethic and employee well-being. Employees shouldn’t feel like they’re sacrificing their personal life and employers shouldn’t feel like they’re being taken advantage of. The most common pitfalls occur when there’s an imbalance or tradeoff.
If a company upholds values around employee happiness, well-being, and appreciation as a motivator for high quality work, employees will in turn value the mission and success of the company. A successful unlimited vacation policy contributes to a culture of mutual respect, which can boost both productivity and employee wellness in the long run.
About the Author
Rachel Fenton is a Content Marketing Specialist at Namely, the all-in-one HR, payroll, and benefits platform built for today’s employees. Namely is a sponsor of the NCHRA HR TechXpo - August 17, 2017 in San Francisco.