If I can squeeze any additional "Wicked" references into this article, I will. Just give me time.
This week, I spoke with a friend whose large company is transitioning from the PTO accrual system to an unlimited PTO model in 2025.
This made me wonder: Is this approach beneficial for nonprofits and small businesses? What are the advantages and disadvantages for both employees and employers to weigh before deciding?
As employers wrap up 2024 and prepare for the upcoming year, reviewing policies such as your PTO policy is always beneficial. Therefore, if you're considering this transition, it's the perfect time to evaluate whether your culture is suitable for adopting an unlimited PTO model.
Outlined below are the advantages and disadvantages for both employees and employers to evaluate if this is something to consider for the upcoming year:
EMPLOYERS
Pros
Trust. Moving to an unlimited PTO model creates an environment of trust between employees and employers. Employees have a sense of confidence that their employer trusts them to do their work on time and on goal while also taking much deserved time off when it is wanted and/or needed.
Recruitment tool. This can be seen to prospective new hires as a huge recruitment tool and also separate you from your competitors during the recruitment process.
Retention tool. This can also be a huge perk for employees and a tough perk to give up to go work for a competitor.
Streamline administrative costs. With an unlimited PTO model, there is no tracking of time off which can drastically reduce administrative processes namely with HR, payroll and finance teams.
Cost-effective. Employers with this model have lower turnover rates. Additionally, employers with this model do NOT have to pay out time off when employees leave the company.
Productivity increase. Since employees know they can take a break whenever they want, they are less stressed and therefore more productive.
Mental health boost. If you say you promote 'work-life balance/life harmony' but only offer 10 days of PTO, what message are you sending? By implementing unlimited PTO, you can back-up that culture of balance and harmony by having this type of time off model.
Cons
Abuse. The most obvious one. Some bad witches might take advantages of taking time off all the time which can effect both productivity and morale. It isn't meant for employees to take months and months off per year.
Scheduling conflicts. This can happen with a traditional PTO policy as well, but with unlimited policies you might have witches and princesses and wizards all wanting time off at the same time and a feeling that it is expected it will be approved all the time.
Less time off taken. With unlimited PTO, you might have people afraid to ask for time off all the time resulting in less time off in a year. If that happens, you could have employees who burn out or end up less productive because they are not taking breaks like they should.
No reward or incentive use. Many companies use PTO as a reward or incentive for good work. You will no longer have this tool in your belt to offer as a reward.
EMPLOYEES
Pros
More flexibility. Employees can request time off without worrying about how much they have accrued or how much is in their bank.
Morale. Allowing employees to take time off without feeling guilty or worrying about job security can definitely improve morale.
Do not have to save all your PTO for one vacation. If you are that person, you no longer have to worry about saving all your PTO for just one big trip.
No pressure to work while sick. Employees can take the time off needed to heal without worrying about using up all their PTO.
Cons
No clear expectations/no checks in place. If you do not have a clear policy in place, employees can be confused about when they can or cannot use their PTO.
Pressure to not use PTO. It has been reported that some employees who work in places with unlimited PTO can feel pressure to not take it if they see that leaders are not taking it either. They may, in turn, end up taking less which defeats the purpose of the unlimited model.
No PTO payout. Not that most employees bank up PTO as they plan their exit, but for those that do that math as part of their exit strategy, they will not have any large PTO payout when they leave a company.
SUMMARY
Unlimited PTO may not be appropriate for all employers or employees. Establishing this model requires the right cultural environment. The concept of unlimited PTO is based on autonomy, freedom, and trust. If your culture lacks any of these aspects, I would not recommend it.
If you're contemplating an unlimited PTO model, I suggest polling your teams to assess interest and informing your employees and leaders about the advantages and disadvantages before deciding. Furthermore, it's crucial to time and plan the transition meticulously and establish a policy with clear guidelines. Employers shifting to this model will also face an initial budget hit as they will need to pay out any existing PTO balances before transitioning to an unlimited PTO model.
Certainly, Alvis People Solutions can assist you if you're having difficulty. Alternatively, you might take the "Wicked" approach by "trusting your instincts, closing your eyes, and leaping"... though I only suggest this method if your name is Elphaba or Glinda and your company name is Oz.
Comments