An unlimited PTO policy may seem counterintuitive, but it can be a strong retention tool. Here’s how to best implement it.
The modern HR team has a number of challenges to solve, but perhaps one of the most long-standing of them is employee retention. Between organizing onboarding for new hires and combating burnout with employee-centric policies, there are several ways that an HR professional can reduce employee turnover.
But perhaps one of the most misunderstood but effective methods is offering unlimited paid time (PTO) off.
Netflix, Github, and LinkedIn are just a few of the companies that have implemented this unusual, seemingly overly gratuitous policy. Currently, about 16% of workers report having an unlimited PTO policy in their workplace. But this rarely translates into actual unlimited vacation time. In fact, employees on average only use about 1-5 of their paid time off. Yet 72% of employees want an unlimited PTO plan in their offices.
Unlimited PTO policies may have a limited effect on retention unless you have an effective system that encourages employees to take a little time off. But before we get there, let’s go over how offering an unlimited PTO plan can benefit your business.
Why offer unlimited PTO?
There are a number of benefits to an unlimited paid time off policy.
First off, 79% of employees consider a work-life balance to be an essential aspect of a good workplace. And unlimited vacation time isn’t just about a paid vacation policy. Unlimited PTO policies often cover sick days, maturity leave, and other common reasons for leave. However, not only does the nature of unlimited time off give employees the feeling of having a “safety net”, but it can be crucial for those workers.
Time off and a better work-life balance can help reduce burnout, provide support for employees during difficult or hectic moments in their life, and promote worker productivity. In fact, employees with a more flexible workplace feel 3.2x better about their work-life balance and 6.6x better about their work-related stress. This can be especially helpful, considering 3/4 of employees experience burnout, which lowers their productivity and increases the likelihood of turnover.
employees with a more flexible workplace feel 3.2x better about their work-life balance and 6.6x better about their work-related stress. This can be especially helpful, considering 3/4 of employees experience burnout.
But how will you know if unlimited leave will make a difference? Over 60% of voluntary departures are preventable. This means that companies have the ability to save on employee turnover. And we know that employees are looking for better benefits and a healthy work environment.
Additional benefits of unlimited PTO
Unlimited PTO policies aren’t necessarily a cure-all. But when 2/3 of employees want more time off, it’s clear that a clear unlimited leave policy can be a significant factor in promoting retention and creating a healthy workplace culture.
Outside of employee retention, Unlimited PTO also reduces the workload for HR teams. Organizations that don’t use this policy have to track each PTO leave independently. Once you start counting the different types of PTO types, including vacation, bereavement, sick days, parental leave, and disability pay, it’s easy to see how scheduling PTO can become a nightmare. Unlimited PTO, meanwhile, lumps all of the different leaves into each category, making it far easier to manage employee scheduling.
Furthermore, unlimited PTO prompts managers to evaluate employees based on performance rather than attendance. As a result, there is an incentivize for employees to better manage their time and productivity.
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4 tips for an effective unlimited PTO policy
There are a number of considerations when it comes to implementing an effective unlimited PTO policy. However, most factors can be reduced to proper employee communication and policy enforcement.
The following 4 tips can HR managers, small business owners, and employees take advantage of the benefits of the new unlimited PTO plan.
1. Write the policy in your employee handbook
It’s important that your employees know about the unlimited paid time off policy and what it exactly entails. The easiest way to do this is to include the policies in the employee handbook.
This will also help to dispel any misconceptions about what this PTO policy really means. While it is known as “unlimited” leave, in reality, unlimited vacation policies do have a limit. However, when the average time off is about 10 days, having a 40 or 50-day limit on paid time off is usually more than enough.
Having a clear description of the unlimited leave policy and what it includes is essential if you want employees to feel comfortable using their unlimited PTO plan.
2. Encourage employees to use unlimited vacation time
Committing to the policy is another critical factor. If possible, strongly encourage employees to take time off. Some workers may feel uncomfortable using their vacation time. They may feel that if they take too much time off, they are at risk of being replaced. Other employees are simply unused to the idea of unlimited time off and still feel the need to accrue their unused vacation days.
Typically, it’s normal to encourage employees to use the unlimited PTO program, including taking a 5-day consecutive leave at the minimum.
3. Use a master calendar to schedule time off
An unlimited PTO policy is difficult to implement and manage if human resources are still reliant on manual scheduling efforts. Scheduling software can make it easy for both the HR team and employees to use the unlimited PTO program without creating understaffing discrepancies. It also becomes easier to keep track of who has used their vacation days, which makes it easier for human resources to follow up with employees who have yet to use their PTO days.
4. Have a company leave week
It may be worth it to include a company-wide leave week to ensure that every worker takes the minimum of PTO days. The best time for this is usually during periods of low activity, such as between Christmas and New Year’s, or during Thanksgiving break.
More on flexible work
An enforced unlimited policy for PTO is part of the retention puzzle for HR teams. By providing an unlimited PTO program, it becomes easier to attract and retain top talent, while creating a productive work environment and positive company culture.
But unlimited time off is just one part of offering a flexible work environment. Get all the flexible work benchmarks and strategies in this report.