According to some of the surveys we have seen, employers that offer their employees Unlimited Paid Time Off (PTO) are in the minority. Somewhere between 4.6% – 9% of employers offer this benefit. If you are considering offering this to your workforce, weighing the pros versus the cons is valuable before making your decision.
Benefits of an Unlimited PTO Policy
- Valuable recruiting tool, especially in a tight labor market
- Fosters a culture of trust and improves morale since it gives employees flexibility with work-life balance
- Less of an administrative burden for the employer to track and manage time off
Pitfalls of an Unlimited PTO Policy
- Not many states provide guidance on these policies making it difficult for employers to create and implement them
- Numerous state and local laws require paid sick time which may be violated by an unlimited PTO policy (i.e., requirements regarding accrual rates, capping, roll over, tracking, etc.)
- If time off is deemed accrued, state law may require it be paid out on termination of employment which could be difficult to calculate and very expensive
- Could easily lead to inconsistent application among employees and give rise to discrimination claims
- Since time off is unlimited, it could be abused
- Employees may be uncertain about how much time off is “too much” resulting in anxiety, poor morale, and burn out
Practical Tips to Consider if you Choose an Unlimited PTO Policy
Develop a clear written policy that includes the following:
- A clear statement about eligibility. Consider making it available only to exempt employees since their pay is typically based on overall results rather than actual hours worked.
- A clear approval process that describes who approves time off, when it may be denied, and why.
- A notice process that describes how much notice must be given before it is taken. Consider a longer notice period for longer periods of time off.
- A limit on the number of days an employee can take off consecutively and per month, such as no more than ten (10) days.
- A carve out on all leaves of absence and sick leave so the company is not left paying for extended periods of time off.
Develop a communication plan to announce the policy:
- Your communication about the policy should be clear, concise, and easy to understand. It should also be well in advance of implementation.
- Consider an in-person discussion to answer employees’ questions.
- Coach your leaders on how to answer questions and be prepared to support them.
- Let employees know what will happen to accrued time that remains unused by the transition date. Even if your previous policy did not include payouts, consider offering a payout of any unused time to make the transition more appealing for longtime employees.
Update all Related Documents:
- Update your handbook and other places your PTO policies are stored. Outdated policies that conflict with your new policy can leave your organization at risk of discrimination claims and possible violations of applicable wage and hour law.
If you are an employer with questions about this topic or any other HR concern, you can reach our human resources team by calling 724-864-8745 or email us at firstname.lastname@example.org. We will be happy to help!
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