Is Unlimited PTO a Good Idea for Small Businesses?

There are plenty of big companies that offer unlimited PTO — and it’s an enticing benefit to any prospective new employee they’re hoping to lure. But is unlimited PTO a viable option for small companies, too?

Reasons why companies offer unlimited PTO

Beyond enhancing your benefits package to attract employees, unlimited PTO also does the following:

• Frees up internal resources to track PTO use;
• Relieves the expectation to pay out unused PTO after an employee quits;
• Demonstrates trust in staff that they’ll get their work done without being micromanaged;
• Eliminates mass time-off conflicts when PTO accruals max out at year-end and employees are rushing to utilize expiring PTO; and
• Prevents germs from being spread when employees are sick, as they’re less likely to come into work when they don’t have to use an accrued day-off.

Concerns of offering unlimited PTO as a small business

But then there are the downsides of unlimited PTO — the reasons why small businesses haven’t adopted the plan. While most companies that currently offer unlimited PTO say that employees use about the same amount of PTO when it’s unlimited versus when it’s accrued, small businesses are still hesitant. Here’s why:

• Concerns about the potential for misuse and/or lack of accountability with an unlimited system;
• Certain employees thrive with defined limits and earned rewards rather than “unlimited”;
• Positions and/or companies that may not be able to survive with certain positions being unmanned for extended periods; or
• Extra pressure on supervisors to more closely manage performance to ensure there’s no abuse of the unlimited PTO policy.

In truth, if your PTO accrual plan isn’t broken, you may not want to change it. But if your company’s culture is right for offering unlimited PTO, here’s how you make it work.

How to make your unlimited PTO plan work

To ensure your unlimited PTO plan is successful, you still have to do some administrative work to set expectations, such as:

• Create a defined policy. Just because your PTO is unlimited doesn’t mean it’s unmanaged or that employees always get time off whenever they want it. For a sample policy, please contact our HR experts at HR@stratus.hr.
• Implement restrictions. You may need to establish guidelines for your company’s busiest times and require employees to provide managers with advance notice. They may need to find somebody to cover for them while they’re gone and/or be available for work calls and emails, depending on their job duties.
• Consider who it includes. Because of complexities surrounding state and federal wage and hour laws, you may want to only offer unlimited PTO to exempt employees.
• Regularly check with managers. To ensure the unlimited PTO policy is not a problem, shifts will need to be consistently covered and productivity measures will have to be met. This means managers may need additional training on productivity metrics and be able to candidly and tactfully address potential abusers.
• Communicate. Both managers and coworkers need to know when an employee is out of the office. This can be as simple as sending out advance notice to coworkers and entering days off in a calendar that everyone in the company can access.
• Encourage employees to use it. Managers should encourage taking time off from work and set the example by leaving themselves. Talk with employees about their upcoming vacations; be excited for them! If an employee’s workload prevents them from taking time off, managers need to reevaluate their load.

If you haven’t yet implemented flexible work arrangements such as working remotely or allowing employees to start early or work late, you may want to start with those before deciding on an unlimited PTO benefit.

And, if you’re seriously considering moving to an unlimited PTO plan, learn how one company made the transition from an accrued PTO plan.

About the author: Colin Thompson (a.k.a., the author of this article), is Stratus.hr’s Director of Human Resources. What does that mean when your company IS the HR team that other businesses turn to? A whole lot of knowledge — and some incredibly skilled juggling, too.