Top 9 Tips for Creating an Unlimited PTO Plan

Have you heard? It’s happening. Organizations are doing it.

I’m talking about unlimited paid time off (PTO) plans. What is this “Unlimited Vacation” or “Unlimited PTO”? It means unlimited vacation, personal, and sick time for employees. Instead of accruing PTO hours as they go, employees can take as much time off, whenever they want to.

Unlimited PTO plans are a recent trend right now, mostly among larger organizations, such as Netflix, LinkedIn, General Electric, and Principal Financial Group. Only two percent of employers were offering unlimited PTO in 2015, according to the Society for Human Resource Management (SHRM), so while it’s not quite the norm yet, it’s quickly gaining traction.

This should be a consideration especially for employers struggling to hire top talent. Ask.com found that 69 percent of people would be more open to accepting a job if unlimited PTO was available.

This concept of unlimited everything sounds good in theory, but is it a good fit for your organization? Consider the following pros and cons to help determine if your organization would benefit from unlimited PTO.

Pros

1. No need to negotiate PTO with candidates anymore. This is one less thing to discuss when it comes time to talk salary and benefits.

2. Undeniably, it’s a morale booster. Being able to take as much time off whenever you want can be an extremely appealing perk to employees, and can boost your overall engagement and retention rates.

3. Reduces time spent “tracking” PTO banks, used and unused, carryover, and payouts. YUCK! Project: Time Off revealed that U.S. businesses held on to $272 billion of unused PTO in 2016. That’s a lot to track. With an unlimited PTO plan, there are less headaches when it comes to dealing with the details. In fact, The Balance states that “when a company doesn’t have to track unused vacation time, this can save as much as $1,898 per employee.”

4. It’s completely fair to everyone. This plan says, “We trust you!” and we want you to be happy. As Levi King says, "It's a Powerful Symbol."

5. Gives the time off control to the organization’s employees. Every employee’s needs are different. Unlimited PTO plans accommodate every employee by letting them do what works for them individually.

6. And, of course, it’s UNLIMITED! Use as much as you want, as often as you want.

Cons

1. Policing goes into full effect to ensure employees actually take time off. With no set PTO hours, some employees may not feel as comfortable taking time off. This can lead to managers and human resources getting involved and making sure that employees are actually using PTO. Taking time off has major benefits for employees, as it leads to rejuvenation, better job performance, and more focus and creativity.

2. Overuse. For example: “No need to worry about a big trip or extended vacation, say for a month, or two, or three…we have unlimited PTO!” A plan of this nature could bring out the abusers. 

3. That leads us to our next point: unlimited PTO or medical leave? Where’s the line? Is there one? It’s helpful to spell this out, so employees aren’t confused when it comes to what qualifies as PTO, and what qualifies as medical leave.

4. Unlimited PTO could possibly lead to tension among team members. Why you ask? Consider this hypothetical conversation: “Well, I’ve only taken six days off this entire year because I had four huge projects, but Sarah has taken six week-long vacations. It’s not fair! She’s a slacker!” Imagine this all year long, and you can see how things might get messy.

5. Who monitors the requests? Who approves time off? Or should we? Are there criteria? Example: one manager approves Frank’s request for two weeks off, but denies Eric’s request for the same two-week request, even with a 60-day notice. Rules that pertain to this need to be established and clear.

6. How do we pay out PTO for an unlimited PTO plan? Or do we? Should we? With normal PTO plans, employees can receive money for their unused PTO. In unlimited PTO plans, payouts become extremely complicated.

This can seem like a lot to consider, but they are all valuable questions and factors to ponder.

Tips to Creating an Unlimited PTO Policy

If you decide to roll out an unlimited PTO plan, here are some tips on how to craft your plan’s policy: 

1. Describe what this unlimited plan means to the organization. Explain why it’s important and the reasoning behind the decision.

2. Address all who are (or are not) affected. This could be full time, part time, seasonal, temporary, non-exempt, and/or exempt.

3. Effective date. When will this plan be implemented?

4. Outline requests. Example: requests for more than two weeks of PTO should be submitted in writing at least 90 days prior to the beginning of the requested vacation period. 

5. Address payout at separation. When an employee leaves your organization, you’ll have to address whether or not there’s any PTO to pay out. This can be done by examining how much PTO the employee took, and determining whether or not there should be a pay out.

6. Address performance and customer service standards as it relates to taking advantage of this plan. Example: Employees are expected to maintain an elevated level of performance and customer service, in addition to their work completed on time and in accordance with company standards.

7. List the organization’s right, as with any policy. You want to make sure you cover your bases and explain that your organization has the right to change the policy at any time, and other legal wording to protect your liability.

8. Address medical requests, leaves of absence, and FMLA. Example: in the event an exempt employee needs to request a medical leave of absence lasting longer than one week, or for any absence that may be covered by short-term disability insurance, the employee must request a leave of absence at least 30 days in advance, or as soon as the need for leave is known. If the employee’s leave is covered by your short-term disability insurance plan, the employee will be eligible to use PTO during the waiting period (up to one week), then will not receive PTO during the period they are eligible to receive short-term disability benefits. This policy does not modify the leave of absence policy, and reasonable accommodations will be made for individuals with disabilities.

9. Be consistent! Just as you would with your other policies, stay true to your word and be consistent throughout.

To DO or NOT to do?

If your organization proceeds with an unlimited PTO policy, keep a few things in mind:

1. “Unlimited” is not the same as “untracked.” Tracking time is essential to any organization, no matter what the plan is.

2. Naming your Unlimited PTO plan. Possible suggestions may include: “flexible,” “self-managed,” “personalized,” or even “responsible PTO.”

3. Include your organization’s mission or values in such an employee-friendly policy. This is a good place to remind your employees what you’re all about and what you stand for.

4. Remember, this policy screams TRUST. Don’t focus efforts on simply curbing abuse or combatting non-use.

5. It isn’t for every organization! No organization is the same, and unlimited PTO may not be the right fit.

As the unlimited PTO trend continues to grow and evolve, it’s worth considering for your organization, to see if it could improve your current system. The flexibility and option to take a vacation at any time is attractive and beneficial, but it’s important to take everything into consideration before changing your plan.

Could an unlimited PTO plan work in your organization?

5 Tactics for Enticing Talent

Lucinda McCuin

Joining the Aureon HR Team in 2017, Lucinda has more than 11 years of human resources experience providing guidance and leadership to senior managers in startup, growth, and stable organizations. Her broad experience includes employee relations, payroll, talent acquisition, compliance, and management in various industries, including senior living and PEO. Her employment history includes positions such as Human Resources Manager, where she provided HR consulting and outsourcing services for small to mid-sized businesses. In addition, Lucinda has held human resources management roles for senior living and hospitality companies. Lucinda is an active member of the DallasHR organization.

Published

December 21, 2017

Posted by

Lucinda McCuin

Subscribe

Sign up to receive the Aureon Weekly Update.