Is unlimited PTO right for your organization?

10 essential factors to assess when considering a new paid-time-off policy.

By Tony Silber      

One significant well-being benefit that gained more widespread use during the pandemic is unlimited paid time off, a concept that has been especially prevalent in the tech industry. As employees struggled to take time off and many lost vacation due to use-it-or-lose-it policies, some employers made adjustments to allow employees to keep vacation time.

In some cases, these were one-off policies, intended to help during the pandemic and set to expire, but with the Delta variant, they’re being evaluated again.

According to the Willis Towers Watson Global Benefit Attitudes (GBAS) survey, released earlier this year, generosity of PTO was employees’ highest priority in the area of work-life balance and flexibility. This, plus a renewed focus on time-off programs that align with diversity and inclusion initiatives and efforts to remove the significant financial liability associated with employees not taking time off are the reasons there’s been an increase in unlimited PTO programs, says Jackie Reinberg, senior director, North America leader, absence, disability management & life at Willis Towers Watson.

Unlimited PTO isn’t really unlimited, of course. It’s more of a marketing tool for recruiting talent than a literal interpretation of vacation policy, SHRM suggests. “We offer it because all of our peer companies do, and we don’t want people to compare us to other companies unfavorably,” said Jonathan Wasserstrum, founder and CEO of SquareFoot, a commercial real estate and technology firm based in New York, said in a SHRM article last year.

SquareFoot established parameters for appropriate use of unlimited vacation. “A handful of employees use four-to-six weeks of vacation,” Wassertrum in the SHRM report. “If they are performing well, we don’t care. If they are not performing well, we need to have a conversation.”

Organizations that adopt unlimited PTO should assess how work is performed and compensated to determine if unlimited vacation is a fit, Reinberg says. One of the key aspects for successful implementation of unlimited vacation is to have a pay-for-performance culture. “Companies need to evaluate how much and when employees use their vacation to understand what a transition would look like from their current state,” she says. “They need to evaluate their appetite for change and how it may help with attracting and retention of talent. If unlimited vacation is adopted it must be embraced by leadership and effectively communicated so employees truly believe it is a benefit for them.”

The most significant risks, she adds, are not having enough staff to backfill for those on vacation, and an inability to allow people to take their time under the unlimited PTO policy. This negatively impacts morale. Reinberg suggests an extensive checklist for designing benefits to meet the needs of a diverse workforce.

  • Listen to the workforce and understand its needs.
  • Communicate leadership’s commitment and expectations that they want employees to take their PTO.
  • Perform benchmarking with designated comparators, and create a financial baseline of the utilization of current programs.
  • Define gaps in your current programs.
  • Develop a holistic strategy in the context of total rewards that will balance both the objectives of the business and the wants of employees.
  • Develop several alternative benefits models and assess their financial impact.
  • Create specific plans for managing workload while employees take PTO. 
  • Encourage managers to take their own PTO and model the behavior to fully unplug, so employees feel comfortable to take their own time.
  • Consider wellness days where the full company is shut down to give everyone permission to step away.
  • Remind employees that it is fine to have a staycation if they are not inclined to travel given current COVID circumstances.