If you’re like other HR professionals, you’ve probably wondered what you can offer to attract new talent to your company. You've likely looked over your compensation and benefits program looking for a new way to bring in fresh talent.
There are dozens of trendy new company perks that top employers are using to lure the best and brightest into working for them. One of the most popular trends in company benefits today: unlimited PTO.
You’ve probably heard of it – but do you know what it is? For many people, it can seem like a buzzword with no real meat behind it. What is an unlimited PTO policy and where should you even start with creating one? The good news is that you don’t have to figure it out alone. We’ve put together the ultimate guide to unlimited PTO.
Unlimited PTO vs traditional vacation policy
Unlimited paid time off, also known as unlimited PTO, can seem like a bit of an oxymoron upon first glance. The idea behind a more traditional paid time off policy is that the vacation time you accrue as an employee has a dollar value behind it. How does an unlimited PTO policy work and how does it differ from a more traditional vacation policy?
What is unlimited PTO?
Just as the name suggests, an unlimited PTO policy is a vacation policy in which employees are not given a predetermined number of days off. Employees can take as many vacation, sick, personal, or mental health days as they need, so long as their manager approves their time off.
The major difference between a traditional PTO policy and an unlimited PTO policy is that under an unlimited PTO policy, you are not limited to a certain number of days off during the year. It doesn’t mean that your employees are entitled to disappearing for months at a time and time taken off under an unlimited PTO policy still requires manager approval.
What are the benefits of offering unlimited PTO?
It can seem like the employee reaps all the rewards for an unlimited PTO policy, but that’s not the case! There are many benefits of an unlimited PTO plan extend to your business as well.
What can your company gain by offering employees unlimited PTO?
Unlimited PTO is a recruiting and retention perk.
You save time by eliminating the administrative tasks associated with vacation tracking.
There’s no rush to take unused vacation days at the end of the year.
It can show your employees that you trust them to be responsible.
In some states, you don’t have to payback employees for accrued vacation time when they quit or retire.
Unlimited PTO greatly reduces the chances that an employee will come to work when sick
Another benefit unlimited PTO can offer your company? It might actually save you money. The Wall Street Journal outlines research from Oxford Economics that shows unused paid time off costs U.S. based businesses $224 billion in liabilities. That’s about $1,898 per employee in the United States alone.
These are just some of the benefits your company can see a return on by creating an unlimited PTO policy. Every company is different and for that reason, you may see these benefits impact your business differently. The key is to remember that everyone can benefit from an unlimited PTO when implemented correctly.
What are the challenges of offering unlimited PTO?
There are, of course, some challenges to having an unlimited PTO policy with your company. Depending on the size of your company, your current vacation policy, and your company culture, you may face different challenges when dealing with an unlimited PTO policy.
What challenges might your company face by offering employees unlimited PTO?
Your employees might not want it! Some employees value having a set number of vacation days worth a monetary return.
People may be skeptical that unlimited PTO is really unlimited.
One downside to unlimited PTO is that, oftentimes, employees expectations of what counts as unlimited and employers expectations can be different.
If an employee chooses to abuse the unlimited PTO policy, you might have a hard time terminating them for being absent because they are allowed that time off.
You still need to track time off, unlimited PTO doesn’t eliminate all the work of tracking vacation policy and employee time off.
Once you switch to unlimited PTO, it can be difficult to switch back to regular vacation without upsetting your employees.
If these challenges don’t deter you from taking the jump into offering an unlimited PTO policy, then you should read on to the next section. It will cover how you can convert your current vacation policy to one that offers unlimited PTO.
How to switch to an unlimited PTO policy
If all this talk about switching your company vacation policy to offer unlimited PTO has you excited, it’s time to talk logistics. You need to create a smooth transition from your current vacation policy to the new one. This will take time and will likely have a few bumps along the way. Don’t worry though, we’ve got four key tips to help you succeed.
1. Let your employees know your plan and be ready for questions
The best way to communicate your new policy plans to employees is to tell them in person. Schedule a meeting with everyone and review the new PTO plan in its entirety. Be prepared for the questions they might have and be willing to answer them.
Afterwards, follow up with an email that outlines everything that was covered in the meeting. Include the option to come meet one-on-one with HR for any employees that may have questions or concerns.
2. Handle your employee’s current accrued vacation properly
The biggest fear your employees will likely have is what will happen to their current accrued vacation. Give your employees the option to either spend the rest of their vacation out over the year or trade it in for monetary compensation.
This means that you will need to announce your plans to switch to unlimited PTO with plenty of lead time. Ideally, you should give your employees about six months to decide what to do with their accrued vacation. This will relieve any pressure they have to make a snap decision and will allow them to plan for a vacation if they want to use their accrued time.
3. Find the right time to make the switch
Giving your employees enough lead time to decide how to use their current accrued vacation is important. As we mentioned before, you need to give employees time to make plans. Many employees will have to speak with their spouses and families regarding vacation plans and that will require more than a couple weeks.
So, when is the best time to make a switch to unlimited PTO? The start of a new calendar year. This will act as a fresh start and many traditional vacation policies already operate on a rolling year over year plan.
4. Keep communication open, take feedback, and improve
As this process unfolds you’ll want to keep communicating with your employees. Give your employees the chance to fill out an employee satisfaction survey about their experience and use those results to drive your decisions. When your employees feel as though their voices are heard, they are less likely to react negatively to the new change.
How should you document and implement your unlimited PTO policy?
The first question many HR managers have about creating an unlimited PTO policy is what the logistics look like. Just because the policy is unlimited doesn’t mean you can abandon the tracking and approval processes.
Creating an easy to use and comprehensive PTO approval process is the toughest part of creating a new vacation policy. Here are the three key steps you should take when you create the internal process.
1. Decide who will be involved in the approval process
The first thing to do is decide who will be involved in the approval process. The great thing about an unlimited PTO policy is that fewer people are usually involved in the approval process. The question you need to answer is who will be involved. Will your process require approval from direct managers only? Will HR managers have the final say in approval? It’s important that you meet with the managers and speak with them about the proposal during this step.
2. Decide on the process employees will use to request time off
Software has made tracking employee vacation easier than ever. The problem is that many programs require HR managers to dedicate a certain number of days to an employee. If your current benefits administration services software doesn’t allow for unlimited PTO tracking, you may want to reconsider your current software.
Looking for a more powerful benefits administration software? Browse the latest software on the market and find one that will work for you.
One way you can simplify the employee experience is to allow employees to request time off using a Google Form. Once approved, you should have employees share their approved time off on a shared Google calendar while you administer the technical side of things using your benefits administration software. This allows your employees ease of use while giving you the option to track things for your records.
3. Set and manage expectations early
The most important step in the process is communicating this process and your expectations with your employees. An unlimited PTO policy doesn’t mean that employees are allowed to come and go as they please.
There are still requirements that must be followed, such as:
How many concurrent vacation days can an employee take in a row
The amount of lead time an employee must give before taking a vacation
Sending in vacation requests using the proper channels
Exceptions for situations such as a wedding, funeral, or honeymoon
Communicating the expectations you have for your employees is important to the success of your unlimited PTO policy. By doing the work ahead of time to anticipate and answer employee questions, you can prevent mistakes and headaches down the road.
Vacation, how to get away!
Maybe unlimited PTO is the right fit for your company or maybe it isn’t. What’s important is that you know what’s best for your employees in the modern work environment. It’s unlikely that you’ll be able to escape from the unlimited PTO trend anytime soon. However, if you provide your employees with the best benefits options possible, you’re already ahead of the curve.
Looking for more employee benefits you can offer your employees? Read about why student loan repayment is the hottest new HR trend and read more articles like this on our HR hub.
Lauren is a Content Marketing Team Lead at G2. You can find her work featured on CNBC, Yahoo Finance, and on the G2 Learning Hub. In her free time, Lauren enjoys watching true crime shows and spending time in the Chicago karaoke scene. (she/her/hers)