Unlimited paid time off (PTO) is an increasingly popular option for employers to attract and retain key talent. However, unlimited PTO or vacation is not right for every company and employers must understand how it will impact their companies before they implement.
Unlimited PTO allows employees to decide when to take time off and how much time to take. The only requirement is to make sure everyone is up to date on the employee’s work and that the employee’s absence will not damage the business. The rationale is that employees will manage their own time well because it is in the best interest of their careers to do so.
Advantages of Unlimited PTO
- Frees up staff resources from tracking accrued paid time off
- Attractive to candidates during recruitment
- Leads to a more engaged workforce because management is trusting employees to manage their own time
- PTO is no longer an accrued expense for the organization
- No rush at the end of the year to take unused time that does not carry over
- Employees feel more in control
Challenges of Unlimited PTO
- Need to ensure that all mandated leaves such as FMLA are tracked and that job remains protected
- Determine when the unlimited PTO has been excessive or otherwise abused and apply standard consistently
- Can be difficult to manage and administer for non-exempt employees
- Some positions may require people to be present
- Can create tension if workers in some jobs can take more time than those in other positions
- Employees may have the perspective that the policy removed the monetary value of the vacation days that they have accrued
- Must pay out all the unused vacation of PTO time they had accrued before the implementation of unlimited PTO—either upon the employee’s departure or on a specific date
- California employers must ensure that they are also provided the state or local mandated amount of paid sick leave either as part of this policy or separate from an unlimited PTO policy
An unlimited vacation policy is best suited to work environments that are project-oriented and don't require employees to perform their duties onsite at fixed hours. Communication and preparation are critical before implementing an unlimited vacation policy.
Lauren Sims is the article’s author and the Director of Human Resources.
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