Unlimited PTO: The Key to Productivity?

Productivity is an evergreen theme in HR – How do you get more out of the resources at hand and improve your employees’ performance?

While it may seem counterintuitive, increasing productivity in your office could depend on your paid time off (PTO) policy.

There are three typical PTO policies: traditional, flexible, and unlimited. There are pros and cons to each, but unlimited PTO is a growing trend for some of the most competitive companies. HubSpot, Dropbox, GitHub, Glassdoor, LinkedIn and Netflix are just a few of the many companies offering the drool-worthy perk to employees.

The give and take of unlimited PTO

According to a recent study by FlexJobs, 84% of Millennials want more work-life balance and 54% want to work a flexible or alternative schedule.

Unlimited PTO is a magnetic recruitment tool, but it’s also a nod to the importance of work-life balance. Gone are the days of deducting 2 hours for a doctor’s appointment against a lump sum of PTO. Employees can take time off when needed, volunteer at the pre-school and still take the kids on vacation for spring break.

Allowing employees to take whatever time they need also plays into an overall culture of treating each other with respect. Each person should know what it means to be happy and effective at work and have the autonomy to do so.

Unlimited PTO can also increase productivity. Team members don’t sweat the small stuff. But they’re also all-in all the time, regardless of where they are. Plus, research consistently shows taking vacation time improves productivity, lowers stress and improves mental health.

On the flip side, implementing an unlimited PTO policy can be difficult.

400 million vacation days go unused each year, and many employees fear the repercussions of time away from the office. Without a set allotment of vacation days, it can be hard for employees to gauge the appropriate amount of vacation days to take.

Tech company Kickstarter axed its PTO policy just a year after implementing it because employees weren’t taking enough time off. And many companies find that after implementing such a policy, employees take the same or less time off than when they had a set amount of vacation days.

The easiest way to avoid these pitfalls of an unlimited PTO policy is by setting clear expectations with your employees and firm guidelines in your policy.

Tips for a successful unlimited vacation policy

Unlimited PTO policies aren’t for every company. But if you’re considering trying a more flexible vacation policy out, there are some things you should keep in mind.

Consider different wording

Unlimited isn’t accurate because there are limits to how much time an employee can take off. The term “unlimited PTO” emphasizes self-indulgence. But professionalism and collaboration should guide your team. While “unlimited” grabs attention, names like “flexible,” “untracked” or “self-managed” might better represent the purpose behind your PTO policy.

Provide guidelines

Help employees understand when it’s appropriate to take time off and when it isn’t by providing guidelines for how PTO request approval. It’s understandable that you can’t approve all PTO requests. But you should make it clear to employees ahead of time to minimize disappointment across the board.

You should also consider setting a standard for minimum days off per year so that employees feel comfortable taking time off. With so many studies showing unlimited PTO policies actually decrease time off, you need to make sure employees are still taking that time to recharge and refresh.

Shift your focus from the clock to contribution

When you turn the clock off, you’re taking away a common measurement for work. Time spent at work doesn’t define quality of work. But removing the clock benchmark begs the question - how much work is enough, and how much time off is too much.

Give your employees and managers tools for defining and communication and employee’s expected contribution. This will help employees manage their schedules and managers evaluate and guide performance.

Compliance concerns

Employers are obligated to adjust certain performance expectations when employees take protected leave, such as under the Family and Medical Leave Act. Employers must adjust expectations to accommodate things like having a baby or caring for a family member with a serious illness.

Putting time off into the propper “bucket” still matters, regardless of your PTO policy. Maggie Grover, a partner at Wendel, Rosen, Black & Dean LLP told HR Dive:

"If you don’t appropriately categorize the protected leave, you may not apply it correctly, may not know when that particular leave is expiring, and may not give the appropriate notices."

Grover also notes that it’s important to write your policy correctly and clearly, distinguishing when time off is paid versus unpaid. The last thing you want is for an employee to expect time off to be paid when the employer certainly won’t.

Employers should also watch for unlimited PTO being used for unintended purposes. PTO is meant for short-term leaves and vacations. It is not intended for serious, disabling illness. There needs to be a clear distinction in your policy for leave that qualifies under something like FMLA or disability benefits. This type of leave is typically covered under an employer’s insurance policy.

Maintain compliance with CORE HR

Luckily, tracking PTO and maintaining compliance is easier than ever with the assistance of HR software. CORE HR is one software making headlines for its innovative and easy to use interface.

When an employee puts a request for PTO into CORE, their manager is instantly notified. Then, the manager can approve, reject or forward the request. Once an action is taken on the PTO request, the employee who submitted the request is automatically notified.

The PTO requests remain as a request until someone approves it. Maintaining this workflow process for PTO is important in a normal PTO policy. But it’s essential for oversight and compliance when it comes to an unlimited PTO policy.

Plus, you can also create any PTO entry as a time entry. Employees are immediately given this option when inputting their time cards. This means no more worrying about whether or not you’ve correctly categorized time off and a clear record of all vacation days.

See for yourself how CORE HR can help you maintain compliance and smoothly implement an unlimited PTO policy. Click below to start your free trial today!