Unlimited PTO—Surprise! It’s Not Unlimited.

Bella FonsecaJuly 26, 2022July 26, 2022

Unlimited paid time off (PTO): the benefits trend that has rapidly grown, especially in the wake of a global pandemic. How exactly are employers able to offer a limitless vacation plan to their employees? A recent webcast, “Unlimited Paid Time Off: Will It Work for Your Organization?,” unpacks this innovative way to recruit and retain talent. It examines two real-life case studies—from one Canadian and one U.S. organization—and digs into the benefits and challenges of unlimited PTO, including implementation, administration and communication issues, considerations for people managers, transitioning from previous arrangements and communicating with employees. This inclusive benefit is based on the company value of teamwork and the belief that everyone deserves time off, regardless of length of service.

Unlimited is a misconception that employers fear; however, it actually describes an unsegregated benefit, meaning that all employees receive the same. Differing from the U.S., Canada has its own legislative vacation policies, which creates a more complex situation. However, in a typical unlimited PTO plan offering, guidelines are established to give managers the ability to help control when time off is taken—Most employers tend to implement this plan to relieve administrative burden. Companies usually have a PTO plan in place that is based on length of service, but this isn’t a shiny tool for recruiting experienced candidates. For example, someone with 15 years at a company may not want to transition jobs if it means forfeiting their accumulated 350 hours for a standard entry amount of seven vacation days that increase with each year.

When changing from a standard vacation plan to an unlimited plan, strong reactions are to be expected, and tenured employees need to know that their earned vacation isn’t being taken away. Unlimited doesn’t mean unmanaged. When implementing a new plan, try using a term like “flexible,” and focus on the importance of taking time off. Communication to managers should specifically focus on how to stay fair and should follow with training after the new plan is in place. To avoid communication inefficiencies, employers are encouraged to create a system to submit time off that correlates with a department calendar of submitted employee time off. Some helpful tools recommended to keep the playing field even include the following:

Capping the amount of consecutive time employees can take off
Keeping PTO and sick time on separate plans
Ensuring that PTO and short-term absences (STA) are different and not to be used interchangeably
Communicating with HR frequently and providing enough time to practice and learn to implement procedures properly and confidently.

Executed correctly, unlimited PTO can be a huge recruitment pull. Managers should regularly talk to employees about taking and not taking time off, but an unlimited plan can drastically reduce financial vacation bank liability. Before making the full switch to unlimited, pay out current PTO balances as a successful start to implementation and a blank slate. Consider a guideline that schedules time off for your employees if they choose not to take it; this promotes mental health awareness, workplace wellness and family time.

Is unlimited PTO right for your organization? Can your organization afford a plan like this? Do you have more tenured employees than not? Ask yourself whether you have the right culture for this plan—Trust and high performance are necessary. You won’t have employees abusing the benefit when you hire those who genuinely want to be a part of your team.