Is Unlimited PTO a Trap? The Reality of Unlimited Vacation Policies

Unlimited PTO, like remote work and similar flexible working trends, is in vogue these days. More and more companies – including small startups and large tech unicorns – are embracing this type of vacation policy in their workplace.

But it’s not all sunshine and rainbows. Many job opportunities that tout unlimited PTO as a valuable employee benefit don’t turn out to be completely truthful.

So, is unlimited PTO a trap? Is it, like it says, truly unlimited? Or is it just a flashy buzzword that hooks unsuspecting job-seekers into a toxic work environment? Read on to learn more.

Is Unlimited PTO Really Unlimited?

Unlimited PTO is very rarely actually “unlimited”.

If it was, employees could go ahead and take 6 months of leave at once, and still get paid. They could come into work only on Fridays, and take leave on every other day of the week.

The business probably wouldn’t survive very long.

There has to be some upper limit. It might not be a specific number, but businesses just can’t afford to let people take a literally unlimited number of leave days. So it’s safe to say that no business’ unlimited PTO policy is exactly as the name suggests.

How Unlimited PTO Really Works

It’s better to think of unlimited PTO as unlimited within reason.

There’s no formal limit on the amount of leave days you’re allowed to take – e.g. a maximum of 12, or 24, or 30 days PTO per year.

But that doesn’t mean that it’s a free for all, and you can decide on a whim whether or not to come into work. You can’t take more leave days throughout the year than you come into work (the exception being specific leave types, such as paternity/maternity leave or sabbatical leave).

There still needs to be a set of checks and balances to ensure that each employee is providing value to the company. That usually means moving the performance standards from attendance, to actual, hard, results.

This allows the company to offer free reign to employees to take as much time off as they want – with the caveat that they still need to hit certain productivity or performance goals.

The Two Potential Downsides of Unlimited Time Off Policies

When unlimited PTO policies go wrong, they tend to fall into one of two categories.

Situation one: employees take too much leave, and productivity drops

The first case is the most common fear when people think about unlimited PTO.

By not limiting how much PTO employees can take, there’s clear potential for damage to productivity when there’s too much time off.

Everyone goes on leave at the same time, or people end up taking leave far too regularly. Nothing gets done, deadlines are missed, clients dropped.

As mentioned already, this the way people often thing unlimited PTO will go wrong. But in reality, it’s more likely to be the second scenario.

Situation two: employees don’t take enough vacation

The second case, and actually more likely, is that people take much less vacation time when an unlimited vacation policy is in place.

Notable companies Namely, Salesfusion and CharlieHR all noticed their staff took less vacation time with unlimited PTO.

Basically, when employees are given a set number of leave days, the expectations are clear, and they accept that the company is alright with them taking that amount of time off.

But with unlimited PTO, the expectations are not so clear. There’s often the unspoken rule (sometimes actually spoken), that you’re taking advantage of the system whenever you take time off.

So employees often feel pressured to work more, take less time off, and burn out faster as a result.

This is where unlimited PTO becomes a “trap” of sorts. It sounds like an amazing, flexible and free policy, but the way the business handles it can turn it from a dream into a nightmare for employees.

Navigating Unlimited PTO and Making it Work

To be fair, both of the two scenarios above can happen through no malice from either side.

In the first one, it’s not always that there are lazy employees consciously taking advantage. Sometimes it’s just that the expectations aren’t clear, and there are no checks and balances to ensure the work actually gets done.

And for the second case, sometimes the company uses unlimited PTO as a mirage, hiding the fact that they pressure employees not to take leave. But more often employees just end up putting pressure on themselves to work longer hours and not take leave.

If you want unlimited PTO to work in your business, follow these tips.

Judge people on clear KPIs

The first, and most important, is to adopt performance-based KPIs (key performance indicators).

It’s traditional to see the people who work the most as the top performers, and those who aren’t around as the ones who are slacking off.

Unlimited PTO forces you to judge people on the work they do, not how often they’re seen around the office (or in Slack). Set clear KPIs, and as long as the person hits their KPIs, it shouldn’t matter how much time off they take.

Set expectations in policies or employee handbook

Setting expectations is another key step. You need to set expectations in both directions – that PTO is not literally unlimited, but at the same time, that they are expected to take time off when needed.

Your business should have a set of policies (such as your leave policy, unlimited PTO policy), that explain these expectations. It could also be in your employee handbook, and something that’s outlined during onboarding or orientation.

Understand the value of employees taking time off

A big step for many companies is simply to understand that it benefits the business to offer PTO to employees.

This should not be something to be avoided. When employees take time off, they end up happier, more rested, and over time, more productive. Stopping or discouraging employees from taking time off will result in lower productivity long-term, and higher turnover rates (which costs the business a lot of money).

There’s a term called presenteeism, which is when employees’ productivity drops because they’re at work too often (as opposed to absenteeism, when they’re absent from work too often).

Presenteeism costs businesses billions of dollars in lost productive hours each year, and it can be avoided by just allowing employees to take enough time off.

Encourage people to take time off

First step is making time off available to employees. The second is actually encouraging them to take their time off.

We mentioned earlier that people tend to pressure themselves into working too much in unlimited PTO workplaces. So you often need to be proactive and push employees to take their leave days, if you notice they’re working too long without taking a vacation.

If you use Flamingo’s leave tracker, you’ll be able to pull up reports in just a couple of clicks to find out which employees aren’t taking their leave days, and gently encourage them to take a break.

Strategies to encourage taking time off

You might even want to go further and devise strategies to make employees take enough time off.

This could involve automated notifications when they stack up too much working time without a vacation, or regular reminders in a Slack channel about the value of time off.

You could also set up company-wide holidays to ensure everyone takes a break and gets a long weekend fairly regularly.

Some companies turn it all the way up to 11, by offering monetary incentives to employees. For example, Evernote pays their staff a $1,000 stipend when they take a vacation of 5 days or longer.

That’s right, they actually pay you a thousand dollars to go on leave. That gives you an idea of how many people neglect their leave days in companies with unlimited or flexible time off.

Summing Up

Our company has an unlimited PTO policy, and has for years. So we know about the pros and cons of a system like this, and how make it work.

It’s true that unlimited PTO often sounds too good to be true. A lot of the time, it ends up with employees taking advantage, or more often, people working too hard and PTO rates dropping significantly.

Putting an unlimited vacation policy into practice takes work, and constant care to ensure it doesn’t go off the rails. But if you do it right, it can be a great benefit for your staff.