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The Pitfalls to an Organization’s Unlimited Paid Time Off Policy

Updated: Sep 16, 2022

What is Unlimited PTO Policy and Is It Good For Your Business and Employees?

An organization’s Paid Time Off policy directly influences recruiting, job performance, and their bottom line. The big debate is whether a company should offer employees a set number of vacation days (a Traditional Paid Time Off Policy) or an Unlimited Paid Time Off Policy. On the surface, an Unlimited Vacation policy may seem “generous”, but if you take a closer look, it may not be in the organization’s, or employee’s, best interest, from both a financial and wellness perspective.

It’s more critical now than ever for business leaders to go back to the drawing board with their Finance Teams & HR Departments to refine their PTO to ensure their goals, standards & expectations, communication strategies, and execution are set up successfully to optimize Paid Time Off usage.

Limited or Unlimited Paid Time Off? That is the question.

Some companies feel that offering Unlimited Paid Time Off will solve all their employee wellness problems. It’s understandable why...according to MetLife's 2019 U.S. Employee Benefit Trends Study, professionals respond positively to Unlimited PTO policies, with 72% expressing interest in receiving Unlimited PTO. Plus, with Unlimited PTO, employers are relieved from the administrative headache of tracking time off and the financial burden of paying out accrued vacation time.

While the idea of Unlimited Paid Time Off sounds nice in theory, in practice, not so much. U.S. professionals are hesitant to take time off, even if they are paid to take it. According to a study by the U.S. Travel Association, 55% of Americans didn’t use all of their vacation time in 2018, resulting in 768 million days of unused Paid Time Off. Even with the well-known positive benefits of taking time off including reduced stress and greater job satisfaction, there’s still a major hesitation to take time off and COVID-19 has only made matters worse, resulting in a sharp increase in employee burnout and vacation accrual liability.

As an organization, if you want to truly execute a vacation policy that will empower your employees to take the time they need to reset and recharge to avoid burnout, a Traditional Paid Time Off policy has proven to be more successful. Here’s why: