Is unlimited paid time off right for your organization?
With talent retention a common issue across most industries, companies are looking for new ways to beat the competition and attract the best employees. They offer great benefits such as health, vision, and dental insurance, 401K match, flexible schedules, volunteer time off, and paid time off. In this blog, we'll focus on whether offering unlimited paid time off is a good idea for your organization and the advantages and disadvantages of doing so.
WHAT IS PAID TIME OFF?
Paid Time Off (PTO) is a benefit that lets employees take time off work while still getting paid. It's a policy that combines various types of paid leave, like vacation, sick days, and personal days, into a single pool. Employees can use their time off however they choose.
PTO is one of the main benefits young people look for when looking to start their careers, and unlimited paid time off has become even more popular. But, despite its popularity, only approximately 1% of U.S. companies have established an unlimited PTO plan. Companies included in that 1% are Netflix, GE, Duo Security, and LinkedIn. Offering unlimited PTO has pros and cons, and these can help you decide if implementing an unlimited PTO plan is the right move for your business.
ADVANTAGES OF PAID TIME OFF
Offering unlimited PTO means trusting your employees. It shows that you trust them enough to eliminate the need to supervise them daily and that you have faith they will do their job and meet deadlines. Implementing an unlimited PTO policy in your company means allowing employees to decide when to take time off and how much time to take without asking their managers for approval.
The only requirement for managers is to ensure employees are up to date with their work and that the department will not struggle during their absence. According to SHRM, the rationale is that employees will manage their own time well because it is in the best interest of their careers to do so. To compensate for having unlimited vacation time, employees usually work very long days each week to achieve the desired results.
Unlimited paid time off also boosts morale. When employees don't have to fight to have a certain weekend off or even take an afternoon off to spend time with their family, they can relax and perform well at work. This also relieves the stress of having to plan out their PTO and budget in case they run out of PTO and happen to get sick or have an emergency.
It is important to know that employees who are provided an unlimited PTO plan typically do not take any more time off than their prior traditional plan. In fact, in some cases, they even take less time off. Studies have revealed that U.S. workers use an average of 77% of their annual PTO hours.
*Data source: Unlimited Paid Time Off: A Good or Bad Idea?
DISADVANTAGES OF PAID TIME OFF
One of the main disadvantages of incorporating an unlimited PTO plan is that it can be tougher to organize and manage employee’s schedules since managers don’t know exactly when employees will decide to take time off. When an employee takes PTO, it affects the flow of work. For companies that have non-exempt employees, the need to make sure hours are covered without paying too much overtime can become very hard and even stressful. Also, because employees don’t always schedule their vacations ahead of time, there will be instances where managers can approve certain employee hours but not others. This can cause confusion, and employees’ feelings may even become hurt.
Another con is that some employees might take advantage of having unlimited paid vacation. Just like there are responsible employees, there are slackers. It is a good idea for managers to track who takes PTO, and when. Even though employees don’t always have to get their PTO approved by their manager, they do have to let them know. At the end of each quarter, managers should review who took PTO and how many days they were absent. This way, they will be able to see patterns and can detect which employees are taking advantage of having unlimited PTO.
Keep in mind that some employees may take a lot of PTO, but they also get their work done and meet their deadlines. So, it is important to not only track PTO usage but also compare it with the work that is completed. For example, if a salesperson takes a lot of PTO during a quarter, the manager should look at the employee’s numbers and see how much they have sold.
WHAT TO CONSIDER BEFORE INTRODUCING UNLIMITED PAID TIME OFF
When deciding whether your company should offer unlimited PTO, remember some jobs require people to be present. This can sometimes create tension between employees if workers in certain departments are allowed more time off than others.
Another thing to keep in mind is that not all employees will react favourably. Communication and preparation are imperative before implementing this kind of plan or benefit. If you are thinking about implementing one, make sure to talk to your employees. Send out a survey and allow your employees to give you their thoughts and feelings on the PTO, this will give you an idea of how well the plan will work.
If you decide to implement an unlimited PTO plan in your company, make sure it links to your company’s culture. Your culture should be geared toward trust and teamwork. Also, be sure to provide guidelines explaining how the plan will work, and how employees can request their time off. If you already have time and attendance software that includes leave management, then employees can request their time off through their employee self-service portal. Like mentioned before, unlimited PTO plans are not for every company, so do your research and talk to your employees before implementing one.
HOW AAB PAYROLL CAN HELP
Our time & attendance software removes the complexity of tracking your employees’ paid time off. Speak to our expert team or arrange a free time & attendance software demo to see the benefits for yourself.
