Unlimited PTO: Is It Right for Your Business?

The following article was first posted by Carmody Torrance Sandak Hennessey LLC as part of the firm’s Carmody@Work labor and employment series. It is reposted here with permission.

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In a tight labor market, employers are searching for ways to enhance their benefits to attract new employees and retain current ones. 

Some employers are considering unlimited paid time off for their employees. Sound like a crazy idea?

Well, some large companies, like Netflix, Oracle and LinkedIn, have adopted such policies.

What Is Unlimited PTO?

Unlimited PTO is what its name suggests. Employees neither accrue nor are they assigned a fixed number of PTO. 

Instead, employees can take paid time off when needed, provided employees keep up with their workload and their absences do not disrupt business operations. 

This provides employees significant flexibility.

Why Do Some Employers Adopt an Unlimited PTO Policy?

A primary reason why employers adopt an unlimited PTO policy is because employees like it. 

A survey conducted by MetLife in 2019 found that 72% of employees favored an unlimited PTO policy. 

Therefore, such a policy can be a real morale booster and an important benefit to offer prospective employees. 

Employers who adopt unlimited PTO also strive to build a culture of trust by allowing employees to use their discretion as to when and how much leave they can take while still fulfilling their job duties and responsibilities. 

What Are the Pros and Cons?

Pros

• Reduces the administrative burden of tracking paid time off, carryover, and payment upon separation of employment
• Can build trust between an employer and its employees
• Promotes a work-life balance, thereby serving as a strong recruitment and retention benefit
• There are some studies showing that employees who take time off and prioritize a work-life balance are more productive
• Employees may be less inclined to come to work when they are sick

Cons

• There are many laws that require employers to provide unpaid time off, such as military leave, leave for victims of domestic violence and disability leave. An unlimited PTO policy must address whether employees can use their unlimited PTO while taking these legally protected leaves. An unlimited PTO policy must also address whether employees can use their PTO to supplement their paid Connecticut FMLA leave up to their full wages. These restrictions can undermine the concept of “unlimited” PTO and create administrative burdens.
• Employees may abuse the amount of PTO they take, resulting in morale issues among other employees who use less PTO
• It may be more difficult to discipline employees for “excessive absenteeism” and, therefore, supervisors and managers must be vigilant in managing performance
• Without a standard for how much PTO employees can take, supervisors and managers may have different tolerances for employees absences resulting in perceptions of unfairness
• Scheduling issues if many employees take time off around certain popular times, such as holidays and summer months

Although unlimited PTO policies have gained some traction, a vast majority of employers continue to provide a fixed amount of PTO. 

Employers considering an unlimited PTO policy must understand and weigh the pros and cons. 

While an unlimited PTO policy may sound enticing, there can be complications.   

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About the author: Nick Zaino is a partner at Carmody Torrance Sandak & Hennessey. He is co-leader of the firm’s business services group, and primarily practices labor and employment law.