The pros and cons of unlimited paid time off

I wish I had more time off. I want to travel.  I just need a break.

We hear (and utter) these statements all the time. Most people in the U.S. get a few weeks of paid time off, but not everyone takes advantage of it — in fact, according to a recent Fortune study, 54% of American workers did not take all their days off in 2016. Despite the under-utilization of industry standard time-off plans, a few employers are beginning to take a different approach by offering an unlimited paid time off (PTO) policy.

Unlimited PTO is the ability for an employee to take as much time off without having to accrue hours or days, provided consent from the organization. Employers are starting to adopt this policy to contain costs since the company will not be responsible for administering accruals and making payouts. It is also a way to offer employees flexibility in their decisions to take breaks. However, if a company is not promoting time off as part of its culture, employees may be reluctant to taking the needed days off.

 

The dilemma

Reluctance to request time off of work could be due to perceived or real negative associations and consequences. There is a component of fear when it comes to addressing time off, both from the employee and an employer.

Employees have real concerns: Is my job at risk if I ask for an unpaid leave for personal development? Will my career stall or will I lose a promotion? Do I need to make a business case for my time off? How will future employers perceive the gap between jobs if I decide to leave the company? Younger workers may wonder if they will be categorized as “another millennial” who is trying to escape the implications of hard work.

Employers often worry that there may not be a financial return if extra days are provided, or if unlimited time off is offered, there’s a chance the work will not get done. They may worry that it is too big of a risk for the business.

 

How “time off” is perceived around the world

Last year, I contemplated leaving my job to travel for six months, and my friends, family and colleagues warned that this would negatively impact my career. I was torn, but in the end, I decided to take advantage of this opportunity.

I made the right decision. I spent six life-changing months in Bangladesh, Malaysia, Thailand, Vietnam, Laos, Cambodia, New Zealand and Australia. This time off gave me a new perspective on how other parts of the world function and allowed me time to reflect on my personal and professional goals. This time away ended up helping me come back to the U.S. motivated to take on new challenges and be ready to work again.  

One interesting observation from my time abroad was that the Europeans and Canadians I met on my journey were not stressed or anxious about taking time off. It appeared to be an integrated part of their cultures. Their countries mandated  three to four weeks of paid leave, though some companies offered more. It was even socially acceptable to take several months to travel before starting a new job. For Americans, this has been more of a source of contention since there are health care benefits to consider upon their return which travelers from other countries did not have to worry about.

I met a couple from Germany who used their months of parental leave to raise their baby in a campervan as they traveled across New Zealand. In the same week, I met an American who rented a car and drove through the entire country in two weeks — his entire vacation allotment — trying to cover every major destination in that short time since he was worried to ask his employer for more than two weeks.  He semi-joked that he would need a vacation to recover from his short and somewhat stressful vacation.  

 

The benefits of flexible vacation policies

While my example of traveling for 6 months is a little extreme, it demonstrates the value that taking time off can bring an employee. More typically, employees take time off for shorter periods of time but more frequently throughout the year. Companies in the U.S. aren’t legally required to offer any paid leave at all (although many pay for 10 national holidays). Only 1% of all companies in the U.S., (including  LinkedIn, General Electric and Netflix),  offer unlimited, or discretionary, paid time off. Some countries are offering a different approach, such as Australia with its  “long service leave,” which allows employees with a certain number of years of work to go on an extended paid vacation.

The benefits of a flexible vacation policy or unlimited and/or extended time off are pretty obvious for those who take it: they get to travel, pursue other outside-of-work dreams, connect with family, relax, and spend more time on their personal goals.

 

There are also many benefits for companies:

  • When companies offer unlimited time off, they won’t have to spend staff resources to  track accrued PTO — or paying it out when an employee leaves the organization. This can have a huge impact on the company’s balance sheet and reduce costs; this is a reason why many companies are currently consider the unlimited time off policy (SHRM).

  • Satisfied, refreshed and grateful employees work harder and deliver greater productivity.

  • Unlimited time off can help retain employees since they are likely to value the benefit the organization provides .

  • Time off can positively impact employees’ health and well-being by reducing stress levels.

  • Employees who feel that their managers trust them to take time off tend to be more proactive, take on additional responsibilities and demonstrate ownership of the results they generate.  

  • Increasing time off supports diversity goals. Unlimited paid time off fits different people’s lifestyles, whether you’re talking about working parents who want to spend more time with their children, or millennials who want the opportunity to travel.

 

Changing the Culture

The unlimited paid time off benefit is still rare in the U.S. but it’s becoming more relevant as a way to not only reduce costs, but also retain and engage employees. When employers offer unlimited PTO, it shows that they value their employees’ personal time and trust employees to make decisions regarding their time. And yet recent studies have shown that employees with unlimited time off end up taking the same number of days, or even fewer, than a traditional vacation policy. If unlimited time off is available, why aren’t employees taking the days?

It’s more than just implementing a policy. If a company wants to offer unlimited paid time off, increase vacation days, or even simply urge employees to use all of their vacation days, guilt free, this calls for a culture change. It’s not enough to simply design liberal time-off policies. Leaders need to support time-off benefits by addressing the associated social pressures — perhaps through a creative communications campaign or by planning ongoing discussions between managers/business leaders and the people who report to them. And, company executives need to set an example by taking time off as well.

 

If you are considering this policy for your organization, I would first urge you to ask the following questions:

  • Is the unlimited PTO policy aligned with your organizational and cultural values?

  • Are your other policies and standards (i.e. work from home, employee wellness strategies) sending out a message that would be consistent with the unlimited PTO policy?  

  • Will your employees, given a variety of demographics and diverse backgrounds, be receptive to this policy and take advantage of it in a positive way?

Unlimited PTO may be right for your company. But if not, at the very least, it may be worth investing in a culture that supports employees’ personal lives and encourages full use of vacation time.

 

About the author:

Tabya Sultan is a Consultant at Nua Group, a San Francisco-based human resource advisory firm specializing in total rewards, and is particularly interested in employee wellbeing strategies and global health. Tabya is always excited about planning her next trip to a new part of the world.