In order to attract and retain top talent, human resources departments monitor the changing needs and demands of the workforce. Recently, the importance of work/life balance has been growing and has given rise to innovative benefits like unlimited PTO. The philosophy is focus on what employees get done, not how many hours they’ve logged. If employees can manage their work, will they use the same discipline to manage how much time they take off? It’s certainly a compelling benefit, but it’s critical to consider all the pros and cons as it relates to your company.
Pros of unlimited PTO
- Highly Valued – it’s a compelling benefit that can help recruit and retain talent along with building loyalty and engagement
- Conveys trust – shows a company supports work-life balance in theory and action. Outside work demands can’t always be scheduled in advance. This conveys that the company trusts employees make sure their projects still get done even if they take time off.
- No end of the year rush – Some PTO policies require employees to take accrued vacation time or lose it. This causes an end of the year rush that would be avoided.
- Reduce administrative expense – Time needed to track and police the use of vacation time can add up. Free up time for those staff members to work on revenue generating projects.
- Reduce fiscal liability – Unused vacation time can represent a significant accrued expense for employers. Companies can gain greater control over those kind of unexpected expenses.
Cons of unlimited PTO
- Reduce productivity – There could be workers who abuse the policy and harm a company’s productivity. Every employee responds differently to less control.
- Legal challenges – Leaves that qualify under Family and Medical Leave Act (FMLA) must be tracked to guarantee job protection for the duration of the qualifying leave. An unlimited PTO policy could raise legal challenges to protected leaves.
- Create tension – Some employees simply must be present to do their job. If some workers can take off more time than others, a policy intended to boost engagement would cause internal tensions.
- Not applicable for everyone – This policy would not work for a unionized plant with nonexempt workers.
- Disciplinary action – How does management decide when the leave has been excessive or abused?
- Reduces earned reward – Loyal, long-term staff spend years earning valuable time off. By offering unlimited PTO to everyone, it removes the monetary value of the vacation days accrued
Every company workforce is unique and there is no one-size-fits-all solution. Before rolling out any new PTO policy, research your employees’ current paid time-off balances and vacation usage. This will help you anticipate any potential backlash. Also review employee job descriptions to make sure expected contributions are clearly defined. Even naming the new policy can be critical. For instance, unlimited PTO implies indulgence. Clearly that’s not your intention for the new benefit.
With any new policy, it’s important to develop detailed guidelines for management and employees. MidwestHR, a leading CPEO in the region, can help companies navigate successful human resources policy rollouts. We make sure employees understand the intended benefits and corresponding expectations. We’re here to help. Give us a call.