Today, almost 1 out of 10 workplaces offers unlimited paid time off (PTO). Among knowledge workers, this type of job benefit is especially common. 

In studies, 62% of employees who have unlimited PTO say they have a healthy work-life balance. However, only 53% of workers who get just two weeks of PTO report having a healthy work-life balance. As an employer, offering unlimited PTO is an effective way to attract potential workers and create a better work-life balance. 

While there are many advantages to providing unlimited PTO, there are also some potential pitfalls to be aware of. By learning more about how unlimited PTO works, you can determine if this benefit is right for your workplace.

The History of Unlimited PTO and Traditional PTO

Originally, the concept of PTO was first developed before World War II. However, early PTO was only given to white-collar workers. Unlimited PTO wasn’t available until the early 2000s. 

One of the first major adopters of unlimited PTO was Netflix in 2003. While there were some initial hurdles to overcome, Netflix quickly adjusted its implementation until unlimited PTO was a success.

While Netflix was an early adopter, other companies quickly integrated unlimited PTO into their workplaces as well. Virgin Group, General Electric, Grubhub, and LinkedIn adopted this type of PTO policy during the early 2010s.

Currently, a large percentage of the businesses that have unlimited PTO are white-collar companies or businesses in the tech industry. For instance, some of the most famous adopters include HubSpot, Dropbox, Gusto, Adobe, Asana, Evernote, Oracle, Salesforce, Zoom, and LinkedIn.

What Is Unlimited PTO? 

At its heart, unlimited PTO empowers employees to take vacation and sick days when they need to. Instead of being allotted a specific number of days or weeks, employees are allowed to take as much or as little PTO as they want. 

While it’s called unlimited PTO, it’s rarely unlimited in practice. Many companies have restrictions on taking PTO during busy periods. Additionally, workplaces should require employees to finish all of their tasks in order to take time off.

With unlimited PTO, the worker must fulfill your expectations before they can go on leave. Then, they can coordinate leave with their manager or team members. As long as they have finished their work and it doesn’t impact their team, they can take as much leave as they want. 

Some workplaces don’t offer unlimited PTO because they think workers will be gone all the time. As long as the policy is structured and communicated properly, this is rarely an issue. In fact, most studies show that workers take about as much PTO with unlimited policies as they do with traditional PTO. Some studies have even found that employees take slightly less PTO with unlimited PTO than they do with traditional policies.

Common Pitfalls To Avoid When Offering Unlimited PTO 

To get the most out of your unlimited PTO plan, there are a few simple steps you can take. Most of the potential pitfalls can be avoided by proper planning and implementation. If managers and workers know what to expect and how to follow the policy, you’re less likely to run into complications. 

1. You Forgot To Train Managers on Your Policies 

When employees have questions about their unlimited PTO, they will most likely turn to their managers for help. Your managers need to understand the policy so that they can respond to questions. Additionally, managers must know when to forward employees to the HR department for tracking Family and Medical Leave Act (FMLA) leave.

2. The Policies Aren’t Clear

Sometimes, workplaces create policies that have unclear expectations. For example, your unlimited PTO policy may include the following requirements. 

• Employees must stay on top of their workload to take leave. 
• Leave can’t be for more than a certain number of consecutive days, such as 10 consecutive days in a row.
• Workers have to request leave through a set process and get it approved. 
• Leave can’t be taken during blackout dates. Often, these dates are during the company’s busy season.
• Employees must provide the reason for their leave to ensure it complies with the FMLA and state-mandated leave policies.

If your policies aren’t clear, workers can’t follow them. Often, these requirements are included in a written policy in the employee handbook and onboarding program. Then, workers are trained on the unlimited PTO policy during their initial onboarding process.

3. Employees Don’t Feel Encouraged To Take Leave 

While many employers worry that their employees will take too much leave if they’re given an unlimited amount, the opposite problem is more common. Workers may worry that they’ll be perceived as lazy if they take a lot of leave. Often, high performers will avoid taking leave because they want to get a raise or a bonus. 

When workers don’t take enough leave, it can have a negative impact on your business. Leave is a chance for workers to recharge. By encouraging your workers to take an adequate amount of leave, you can improve your employees’ morale and productivity.

4. You Aren’t Tracking FMLA Leave Appropriately

Leave tracking is a major issue. Even though you’re providing unlimited PTO, you need to track it. First, tracking helps to prevent abuse and ensures everyone is taking enough leave. Good tracking is also important because you need to comply with the FMLA and state-mandated leave laws.

You’ll need to coordinate with an employment lawyer before implementing unlimited PTO. Your company may be required to provide and track state-mandated leave. For instance, Washington State requires employers to provide 1 hour of sick leave for every 40 hours an employee works. To be compliant with this type of policy, you may need to track sick leave separately from unlimited PTO.

5. Your Company Didn’t Create Investigative Procedures for Potential Leave Abuse

Even though unlimited PTO isn’t abused often, it does happen from time to time. If someone is using an excessive amount of PTO, it can impact their team’s morale and productivity. Because of this, you need to create investigative procedures and ways to monitor potential cases of abuse.

However, you can’t monitor and investigate cases of abuse if you aren’t tracking PTO requests. Because of this, creating a tracking mechanism is one of the most important things you can do when you implement an unlimited PTO policy.

6. The Policy Is Unintentionally Discriminatory 

When creating an unlimited PTO policy, it’s a good idea to set a minimum requirement for the amount of PTO employees should take. In studies, minorities and women are more likely to take less paid leave or to worry that taking leave could cost them their jobs. One study found that women were 43% less likely and minorities were 19% less likely to use unlimited PTO than their colleagues. 

By setting minimum requirements for taking leave, you can encourage workers to use it. Your company culture is another factor that influences the likelihood that someone takes leave. Additionally, you can use your PTO tracking system to ensure that all of your workers are getting a reasonable amount of leave each year.

7. Workers Are Overusing the Policy

If there isn’t enough oversight, some workers will abuse an unlimited PTO policy. Creating a written policy, training workers on the policy, and tracking PTO can help deter abuse. Additionally, your investigative process can help you spot cases where workers are taking an unfair amount of PTO. 

How Does Self-Managed PTO Work? 

Self-managed PTO is a type of unlimited PTO. However, self-managed PTO is tracked. The worker is still empowered and has control of their time off, but their time off is tracked. There are normally additional expectations, such as the worker must finish their tasks before they go on vacation.

With self-managed PTO, it’s easier to comply with the FMLA and state-mandated leave because you’re already tracking leave. Self-managed PTO helps companies avoid some of the common issues that occur with unlimited PTO because tracking automatically reduces PTO abuse. Because you’re tracking it, it’s also much easier to ensure all of your workers get an adequate, fair amount of leave. 

Depending on the self-managed PTO system you use, workers may be able to submit their time off requests through the system. Then, managers or the HR department can easily review, track, and approve the requests.

Learn More About Unlimited and Self-Managed PTO 

A majority of workers want their future jobs to have unlimited PTO. By offering this benefit, you can improve employee satisfaction, boost talent acquisition, and enhance your company’s productivity. 

At Asure, we recently adopted a self-managed PTO plan as a benefit for our workers. If you have questions or want to learn more about using self-managed PTO with your HR system, reach out to our team of small business HR and payroll experts today.