Unlimited PTO sounds like an amazing benefit. But, is it too good to be true? Don’t get us wrong, any PTO is a benefit. However, in most cases unlimited PTO is not any better than a traditional PTO plan. In fact, it is sometimes worse. If you are trying to decide between two jobs and you are leaning toward one because the company offers unlimited PTO, read this before accepting that offer.
What Is Unlimited PTO?
Unlimited PTO is a vacation policy that allows employees to take as much time off as needed as long as it does not interfere with the employee’s work. The employee usually needs manager’s approval. This is different than traditional PTO in that there is no cap. A traditional PTO schedule limits the amount of time an employee can take off every year.
Why Do Companies Offer Unlimited PTO?
Offering unlimited PTO can benefit a company by attracting talent. Like previously said, most employees want unlimited PTO. If you are not aware of the downfalls of an unlimited PTO policy, this sounds like an amazing benefit. Companies use unlimited PTO as a recruitment tactic.
Another benefit a company gets by offering unlimited PTO is not having to pay employees accrued vacation time upon termination. In most states, accrued and unused vacation time must be paid to an employee upon termination. Under an unlimited PTO policy, it can be argued that there is no accrual, and thus, no vacation payout is required at termination.
You May Take Less Vacation Time
The idea of having the option to take as much time as you need for vacation sounds amazing. However, data shows that most employees actually take less time off than those with a traditional PTO policy. Employees with an unlimited PTO plan take an average of 13 days off per year vs. 15 under a traditional PTO plan.
Employees with an unlimited PTO plan are not certain of how many days to take off. Employers don’t usually provide an average or a recommendation on how many vacation days to take. With this uncertainty and lack of clarity, employees err on the side of caution and take less days than what they would have taken under a traditional PTO plan.
With a traditional PTO policy, PTO is earned. You are given a set number of days and are encouraged to use them. With an unlimited PTO policy, employees are not sure if and when they have earned the vacation time. Employees can feel guilty when asking for vacation which results in taking less time off from work.
Animosity With Your Co-workers
With an unlimited PTO policy, most employees don’t take the time off they deserve, some take the right amount of time and some abuse the policy. If you are the majority and don’t take enough vacation time, you may resent those employees that abuse the policy. You may also end up getting more work in the absence of your coworkers. This can create a hostile and unenjoyable work environment.
Not Getting Paid For Unused Vacation
Under a traditional PTO policy in most states, an employee gets paid for accrued but unused vacation days upon termination. With an unlimited PTO policy, it is uncertain how may days an employee accrues. As a result, you will most likely not be paid unused vacation days upon termination even if you have not taken off very many days. This could end up being a few hundred to thousand of dollars.
Unlimited PTO is definitely better than not having any PTO, but if you are trying to decide between two jobs that offer PTO, don’t let the unlimited PTO be the deciding factor. Ask the employer what is expected of you under the unlimited PTO plan and the how many vacations days on average current employees take. This may give you a better perspective when deciding if the unlimited PTO policy is better than the traditional PTO policy.
This article is intended for informational purposes only. It provides general information and is not intended and should not be construed as professional advice. The author is not your attorney, accountant, financial planner or any other professional and no professional-client relationship is created. We do not represent that the information provided is accurate or up-to-date as laws and regulations are always changing. If you have an issue that requires professional help, you should contact the appropriate professional to help you on your specific set of facts. Please read the Terms and Conditions for additional information.