It’s summer vacation season. Employees who may spend the rest of the year squirreling away their vacation time are finally getting out of the office to go on a European adventure or take a long-awaited family trek to a theme park. What if they had unlimited paid time off (PTO) and didn’t have to scrimp and save their precious vacation days throughout the year? Would they view it as a perk that helps them achieve work-life balance, or would it cause confusion and resentment?

Unlimited Paid Time Off—Who Benefits?

In her article “A Practical Guide to Implementing Unlimited PTO,” in the July issue of Benefits Magazine, author Laura Earley, CEBS, suggests that—implemented properly—an unlimited PTO program can help boost employee morale and offer some other benefits for employers. Earley also will speak on the topic at the 36th Annual ISCEBS Employee Benefits Symposium in September.

Unlimited PTO has gained some attention since companies including Netflix and LinkedIn have implemented the benefit. A 2015 Mercer survey showed that 14% of respondents offered unlimited PTO to at least executives or exempt employees, and 7% of respondents were considering offering it.

As employees increasingly stay connected to the office 24/7 with their smartphones or laptops, such programs offer a way for them to take the breaks they need without having to account for every single hour away from work.

Some employers see unlimited PTO as a progressive benefit that can attract top talent. Actually, the single biggest reason for offering unlimited PTO, Earley writes, is that it allows employers to wipe vacation time liability from their record books. While employers in most states are still liable for existing vacation time, they can eliminate future liability.

Proper management training and a comprehensive communication campaign can help limit the potential for abuse of an unlimited PTO program. Unlimited vacation doesn’t mean employees can walk out the door whenever they want. They still have to schedule vacation time, coordinate with other co-workers and get time approved by supervisors.

Managers must be trained to make sure they handle those requests fairly. While supervisors might be more lenient with vacation requests from high-performing employees, employers should make sure that there aren’t other discriminatory factors causing managers to deny vacation requests.

Other issues to consider prior to offering unlimited PTO include how it will be coordinated with short-term disability programs and extended absences for personal medical conditions. Earley recommends that employers establish or clarify their Family and Medical Leave Act or parental leave policies to reflect whether unlimited PTO is eligible for those types of absences.

[Related: Sample Documents for Members: View paid-tim​e-off policies shared by International Foundation members.]

The growth of local, state and jurisdictional requirements for paid sick time is another consideration for employers. An unlimited PTO policy does not exempt employers from those laws.

Earley warns that employers need to be ready to address all kinds of reactions from their employees. Long-term employees with large vacation balances may not like the policy. Some employees may underutilize the program either because of uncertainty or fear that the office can’t function without them.

Employers might consider implementing a minimum threshold and making sure managers encourage or even demand that workers take time off. Taking too little vacation can be bad for employees.

An unlimited PTO policy may not be feasible for all employers and workforces but, Earley writes, it may be one strategy for employers to meet the needs of a changing workforce.

Kathy Bergstrom, CEBS
Editor, Publications at the International Foundation

Kathy Bergstrom, CEBS

Editor, Publications at the International Foundation

Favorite Foundation service/product: Benefits Magazine and Plans & Trusts

Benefits related topics that interest her most: Financial literacy, health and wellness programs

Favorite Foundation conference moment: Hearing attendees sing “O, Canada” at Canadian Annual in addition to hearing the anthem sung in both French and English.

Personal Insight: Whether she’s collecting information for a magazine story or hanging out with her family and friends, you know Kathy is fully engaged. Her listening ear and introspective nature provide reassuring presence to those enjoying her company.

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