How to manage an unlimited PTO policy

Unlimited paid time off (PTO) sounds like a great benefit. Combined with flexible hours and freedom of location for remote teams, unlimited PTO should theoretically allow workers to live their lives on their own terms.

Theoretically.

In truth, even well-meaning companies don’t always implement unlimited PTO policies correctly. Research indicates employees often take fewer days off with unlimited PTO than they do with more structured policies.

Done right, unlimited PTO enables your employees to experience work-life balance while ensuring your company maintains an engaged, effective workforce every day of the year. Make sure your unlimited PTO policy falls on the right side of the line by following some basic, often overlooked rules.

What is unlimited PTO?

Unlimited PTO is a company policy that gives employees the freedom to take unlimited time off from work without a specific limit or accrual of vacation days.

Unlike traditional PTO policies, which grant employees a fixed number of vacation days per year, unlimited PTO removes the constraints and tracking related to managing vacation time. With the autonomy to decide when and how much time off they need, employees can achieve a better work-life balance.

And better balance can lead to reduced burnout, improved job satisfaction, and boosted productivity.

A PTO policy is part of any strong benefits package. Most potential hires look at the benefits the company provides before applying for or accepting a job offer. In fact, 62% of job seekers want unlimited PTO more than any other benefit, including employer-paid health insurance (51%), employer-sponsored retirement programs (44%), and separate paid leave (43%).

For many candidates, unlimited PTO is the most desirable benefit option a company can offer. Embracing such a policy sets your company apart, as it demonstrates your commitment to supporting your employees’ well-being.

However, unlimited PTO policies differ among organizations, and not all of them lead to positive results. Let’s take a look at how unlimited PTO works before discussing how you can manage your policy.

How does an unlimited PTO policy work?

While unlimited PTO suggests that employees can take unlimited time off whenever they need it, that doesn’t mean it’s a free-for-all. Companies usually have a system in place for employees to request and track their time off.

Some companies use modern HR management systems, where employees can easily add their time off requests. Others may rely on more traditional methods, like talking to their managers or filling out paper forms.

There needs to be a foundation of trust and open communication between employees and employers to ensure an unlimited vacation policy works smoothly.

When employees feel trusted to manage their own schedules, not only do they develop a sense of empowerment, but they also feel valued and respected. This contributes to a positive company culture.

From the employer’s perspective, trusting your employees to handle their time off promotes accountability and ownership, leading to increased productivity and employee satisfaction.

However, not all industries enjoy the same amount of PTO. The service industry, for instance, may offer fewer leave options than others. So, consider industry-specific factors when tailoring an unlimited PTO policy to align with your company’s needs and industry standards.

The role of state and local laws

State and local laws can significantly impact PTO policies, especially when hiring internationally.

Different regions have specific PTO laws that employers must follow. For instance, in the UK, employees are entitled to a minimum of 28 days of paid annual leave, while in Australia, the National Employment Standards ensure a minimum of 20 days of annual leave for full-time employees.

In New York, employers are obligated to provide PTO under the New York State Paid Family Leave Act, which grants paid leave for various family and medical reasons.

These laws are designed to protect employees’ rights and ensure that workers receive enough time off. As an employer, you need to know the PTO laws and regulations of each location you’re hiring in to make sure you treat your employees fairly.

Pros and cons of unlimited PTO

When considering having an unrestricted PTO policy in your business, make sure to carefully weigh the advantages and disadvantages before deciding on a plan that fits your company’s objectives and standards.

Pros:

• Better employee retention: An unlimited PTO policy is a valuable benefit that can attract and keep employees, as it enhances job satisfaction and builds loyalty.

• Healthier work-life balance: Flexible time off policies are a big contributor to work-life balance. According to the International Labor Organization, “work-life balance policies provide significant benefits to enterprises, supporting the argument that such policies are a ‘win-win’ for both employers and employees.”

• Reduced pressure: The availability of unlimited PTO reduces the pressure on employees to come to work when they are sick or facing personal issues. This policy allows them to prioritize their health and well-being without compromising their job responsibilities.

Cons:

• Potential system abuse: Some individuals may take advantage of the unlimited PTO policy, leading to misuse or abuse of the system. So remember to establish clear guidelines and expectations around the policy and maintain fairness for all employees.

• Reluctance to take time off: Certain employees may feel hesitant to take time off because they worry about letting down their colleagues or managers. It’s important to create a supportive and inclusive company culture that encourages taking time off when needed.

• Lack of accrued days policy: Unlimited PTO usually means there isn’t an “accrued days” policy. Employees may find it disappointing if they are accustomed to tracking and accumulating their vacation time.

Unlimited PTO policy best-practices

Creating an effective unlimited PTO policy is key to keeping your employees for the long haul. Adopting best practices lets you design a policy that fosters a healthy work-life balance, increases job satisfaction, and cultivates strong loyalty among your workforce.

Don’t keep score

When designing an unlimited PTO policy, adopt a “don’t keep score” mentality. Let employees freely choose their time off without tracking or judgment to establish an environment that values work-life balance and supports individual needs.

Only track employee time off for official reporting purposes, which some countries require. Track performance metrics based on real productivity without respect for hours spent in the office. Not only do studies show that employees who work long hours are more likely to suffer from health problems, like heart attacks and strokes, but working more than 55 hours doesn’t correlate to gains in productivity anyway.

Remote’s unlimited PTO policy does not “keep score” in terms of which employees take the most time off. Our “tell, don’t ask” policy gives our team members the benefit of the doubt. We only ask that anyone who decides to take time off let others know in advance by using our unavailability calendar.

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Set a minimum

Set a minimum number of days that employees must take off, both for individual stretches and for the year in total. Ninety percent of employees believe this type of workplace flexibility boosts morale and productivity.

We mandate a minimum of 20 days off per employee per year. While we expect most team members to take more than that, we insist they take at least that much for their own well-being and for the sake of their productivity at work.

Encourage employees to take at least one long stretch away from work each year and make special policies for significant life events. Our parental leave policy, for example, mandates a minimum of 14 weeks off for new parents.

If employees don’t take enough time off, don’t try to make it up to them by offering a cash bonus or other compensation. Some people within the organization may take as little time off as possible in the hopes of scoring a big check at the end of the year. Instead, work with managers to ensure team members take regular breaks from their work. At Remote, we follow a general rule that every person should always have some upcoming time off on our unavailability calendar.

Identify and eliminate bottlenecks

Nothing highlights a problem with your business like having everything grind to a halt because one person takes a week off. If your company can’t handle someone’s absence, that’s not the responsibility of the person who took a vacation — it’s yours to ensure that no single person holds the keys to your company’s growth.

Early-stage businesses can’t afford to keep many people with duplicate responsibilities. Such companies may only have one designer, one marketer, one IT manager, or one salesperson. In these cases, people taking time off should communicate early and often to keep others updated on upcoming projects and events. This practice not only fosters transparency but also nurtures a culture of open communication, enabling team members to collaborate and support each other as needed.

We strongly advocate for asynchronous work and vigilant documentation for the same reasons. Once everything is public to everyone (we use Notion for this) and no one feels required to work during specific time slots, anyone can read the documentation and pick up where others left off without the need for catch-up meetings, which are time-wasters anyway.

Respect personal and cultural differences

People should communicate if they expect to take off for a holiday, but cultural differences are not limited to days on and off. Some people may feel comfortable doing a little work on their days off, even when their leaders assure them it’s not necessary. Others may delete Slack from their phones, shut down all email notifications, and head up into the mountains to get away from the world for a while.

Both approaches are fine. If one person feels comfortable answering emails in the evening and doesn’t feel pressured to work through every vacation, respect that choice. If someone else goes off the grid, though, don’t hold that person to the same standard as their more connected colleagues.

People view their vacation time differently, especially when it comes to international and foreign workers. Respect these employees’ differences to create an inclusive and welcoming environment that values their unique perspectives and cultural backgrounds. All team members, regardless of their background, should be encouraged to take enough time off.

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Make unlimited PTO a perk, not an excuse

With traditional PTO, employees accrue time off in a bank and are entitled to a payout of that bank’s value when they leave the company. Unlimited PTO is an ongoing perk, which means employees do not bank hours or receive payouts for unused time if they leave the company, no matter how much (or how little) time off they took during their employment.

Rather than view unlimited PTO as a cost-cutting measure during exit interviews, work proactively to ensure both sides benefit from the perk while the relationship is ongoing. Regularly bring up your unlimited PTO policy in team meetings and remind employees who do not have any time off on the calendar to schedule some. At the end of the employment relationship, employees should feel like they got a great deal during their time with the company, not like they missed out on a parting payday.

Your employees need time off to function well on the clock and to live their best lives as humans off the clock. The most successful companies are full of happy, productive people who are engaged with their work and don’t feel burned out. Unlimited PTO can help create that positive reality, but to make it work, you must proactively build a culture that champions a healthy work-life balance.

Constructing a compliant global benefits plan is easy with Remote

Unlimited PTO is an attractive benefit that your employees will appreciate.

While such a policy can be tricky to put into practice, all you need to do is implement a framework that supports it to walk on the road toward PTO success.

Remote is here to help you attract top talent from around the globe. Download our guide on how to build a global benefits plan while staying compliant with local labor laws today.

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