Well-being has become a priority for many organizations, as stress and burnout have been on the rise since the start of the pandemic. As the Great Resignation continues, many companies are willing to try anything to retain employees and attract the best talent. And so some are considering implementing unlimited paid time off policies, accelerating a trend that was gaining steam even before the pandemic forced a fundamental rethinking of work-life balance.
Unlimited paid time off was pioneered by law firms hoping to attract talent by offering more autonomy; under the scheme, workers can take as much time off as they want, as long as their work gets done. The tech giant Netflix later adopted unlimited PTO and pushed it toward the mainstream; other tech companies like Dropbox, HubSpot, Evernote and LinkedIn followed suit.
In the pandemic-era workplace, scheduling flexibility is one of the perks employees want most, according to ADP, including having more time off. A Harris poll of more than 2,000 U.S. workers for Fortune in February 2022 found that 65% of respondents would like to have unlimited paid time off. And employers are listening: The share of LinkedIn job postings offering some version of unlimited PTO nearly doubled between April 2021 and April 2022, Bloomberg reports.
Research shows that the younger workforce is especially attracted to unlimited PTO. The Harris Poll found that 74% of Gen Z respondents wanted unlimited time off, compared to 70% of Millennials, 68% of Gen Xers and just 45% of Baby Boomers.
How unlimited PTO works in practice is as varied as HR experts’ opinions on whether such a policy is in employees’ best interests. So how does unlimited PTO really work in organizations in the real world?
Why try unlimited vacation?
Cordelia Morgan is the head of people at KaFe Rocks Group, a remote-first company in Malta. Her company adopted unlimited PTO to give employees a better work-life balance.
“Going through some historical data after I joined the company, I saw that employees usually referenced wanting better work-life balance, like getting to spend more time with family and friends,” she says. “I also noticed that other companies in our industry were doing progressive things with their leave policy, so why shouldn’t we? This is where the idea of unlimited vacation came in. It makes sense for us to let our people take holidays when they want and when they need it, to be able to rest, recuperate or just enjoy some time off.”
According to Morgan, unlimited PTO at her company was recently implemented, so it’s still too early to say how much difference it has made compared to the previous policy of limited holidays. “There might be a few extra-long weekends or extra few days at Christmas time, but we’re not really expecting significant change in the time taken off,” she says.
Does unlimited PTO work?
Here’s the paradox: If a worker has unlimited vacation days, will they actually use them? Some studies have found that employees with unlimited PTO took fewer days off on average than those with limited vacation days. J.B. Chaykowsky, who works for a London-based financial software company, said that was his experience when he worked in a company with an unlimited vacation policy.
“We had intense timelines, which made you feel guilty for taking time off, as if you were letting the company down,” Chaykowsky says. “As a high performer, you want to always make an impact, and if you take time off in a competitive environment, you feel you are missing out. I always felt the pull of work and took little time off. There is always one reason or another not to take time off.”
Skye Mercer is a human resources consultant based in Iowa in the United States who has worked with companies with both limited and unlimited paid time off policies. She believes having an unlimited PTO policy alone does not work. One option is to require a minimum amount of time off, but even then, it is important to have the culture that backs it up. In Mercer’s experience, employees with unlimited PTO are unlikely to unplug completely.
It makes sense for us to let our people take holidays when they want and when they need it.
Cordelia Morgan, Head of People at KaFe Rocks Group
“In my experience, mandatory PTO or unlimited vacation means that employees continue working even while on vacation,” she says. “If a company is known for a fast-paced culture where people are overworked, they usually go on vacation with their laptops and cell phones and are available to their supervisor because no one is covering their work.”
Beyond having a written policy, company leadership should be able to shape the policy with flexibility and boundaries, so employees can work in ways that suit their productivity best, according to Mercer. “It’s important to have a policy with clear roles, responsibilities and expectations at every level of the organization; individual, supervisory and executive leadership,” she says.
Chaykowsky agrees. “While unlimited vacation might be a nice-to-have perk, the company must have a supportive culture, a working plan and adequate staffing,” he says.
Is there such a thing as too much vacation?
Jakub Rudnik is the Head of Content at Scribe and has managed more than 40 employees in three companies, two of which offered unlimited PTO. He reports just one instance of over-the-top vacation taking.
“I only had one employee who abused the policy, and we had to have a conversation,” Rudnik says. “In most cases, you had to encourage people to take days off. Most preferred taking long vacations and didn’t just take days off at random. In my experience, employees that have this policy work harder and are more invested in the company.”
Morgan says that although there are risks to having unlimited PTO, having a great communication culture and structure helps keep potential problems at bay. Employees at her company are required to give a month’s notice if they want to take more than three weeks off, so the company can plan effectively, but a day’s notice would suffice if an employee needed just a few days off. A tool tracks holiday time approved by managers.
“We are a remote-first company, so communication is a big deal to us; we are output-focused and are not so bothered about when people do their work,” Morgan says.
The trend seems to be centered in the United States, though it’s also spreading globally. Workforce consultant Willis Towers Watson reports that just 5% of companies with at least 100 workers offer unlimited time off. A major difference is that U.K. employment laws give most full-time employees at least 28 days paid leave a year, while in the U.S., the average leave is 10 days per year, and there is no federal minimum.
“Having a clear policy and guidelines on how unlimited vacation should play out helps the implementation,” Mercer says. “I think the company must be clear on what the value of work-life balance, flexibility, and honoring employees’ boundaries means. What does that look like?”
At the employee level, there needs to be clear communication of boundaries with the manager about things like expectations and availability.
“The manager should honor the employee’s boundaries and respect their schedule. At the executive level, there should be policies in place and managers trained to fully understand the policies, thereby creating a culture where there’s mutual agreement, expectation and respect among leadership and employees.”
Read more
Sign up to keep up to date with ReThink Quarterly.