In Honor of Labor Day, Let's Eliminate Unlimited PTO
In Honor of Labor Day, Let's Eliminate Unlimited PTO
Unlimited PTO is better for companies than for workers, and we need to stop pretending otherwise.
It sounds enticing enough. I know it did for me the first time I was offered a benefits package with that sparkling line: UNLIMITED PTO.
What’s not to love?
I discovered pretty quickly what’s not to love: the two years I worked for a company with unlimited PTO, I took the fewest vacation days of my entire career.
And I know I’m not alone.
(Is it crazy to come out as an executive coach aligned with the working class over business? Perhaps. Time will tell. I’m feeling sassy on Labor Day!)
Why Unlimited PTO is Bad for Workers
It really boils down to these five things:
Unlimited PTO results in underutilization. Research shows that employees take less time off because they are unsure about what’s acceptable. When you don’t clarify what an acceptable number of days is, there can be unspoken pressure not to take too much time off because you’re afraid it will make you look like you’re taking advantage of a generous system. No one takes ten bagels on Free Bagel Friday, and no one will take four weeks of vacation on unlimited PTO.
Leaders at startups tend to take less time off, which means employees feel like they can’t either. Founders are notorious for eschewing vacations as they’re building a company to $50M. I worked for one founder whose partner would force him to take vacations, and he’d be on the phone with me from the bathroom of the ski lodge or the lobby of a Broadway show. It is hard for me to take real vacations if he’s not taking them. And if I’m not, then my team feels uncomfortable, too.
You don’t get paid for unused time. In traditional PTO policies, employees often get paid for unused vacation days if they leave the company. With unlimited PTO, employees leave with nothing since there’s no accrued time, which can be a financial disadvantage for the employee (but good for the company, and we’ll get to that in a minute).
People are going to get burned out. Without clear structure and clear expectations, employees won’t take adequate breaks and will get burned out. Gallup also found burned-out employees cost $3,400 out of every $10,000 in salary because they are disengaged in their work.
PTO is subject to manager approval, which can lead to inequity. Unlimited PTO can give an advantage to slackers over conscientious workers. But more often, it means every vacation approval is at the discretion of your manager. I’ve seen managers play favorites and allow some to take days off, not others who have fallen out of favor.
Why Unlimited PTO is Good for Companies
I hate to be the bearer of bad news, but most things that are good for corporations are bad for workers. Or, at the very least, if a policy is INCREDIBLY ADVANTAGEOUS for companies, it’s worth looking very closely at the impact on workers.
Conversely, policies that advantage workers are also profitable for companies because happy, rested, fulfilled workers work better and harder. So, if just being a decent human being on planet Earth isn’t enough motivation to convince you to treat workers well, sleep well knowing that being good to workers is also good for your stock prices.
But I digress.
The reason unlimited PTO is good for companies:
They get more work out of workers: As described above, unlimited PTO results in less PTO taken, which in an overly simplistic analysis indicates you’ll get more work out of people (we know that’s not true, that burned out people actually work less).
They save a ton of money. Traditional PTO policies require companies to track and sometimes pay out unused vacation days, which can accumulate as a liability on the balance sheet. With unlimited PTO, there's no need to track unused days, potentially saving money in the long run. In fact, companies won’t have to pay employees for unused vacation time when they leave, as there's technically no accrued vacation time to cash out.
It makes administration simpler. There's less need for HR to track and manage PTO balances, which can simplify administrative tasks.
It helps recruitment. Studies show that workers like the idea of unlimited PTO in the interview process until they get into the job and recognize the inherent flaws with the system.
What Leaders Can Do
If you are a founder with any power, please stop offering unlimited PTO. If you must, offer guidelines with a ceiling and a floor, meaning everyone must take at least one week and no more than four weeks.
If you’re offering benefits like free kombucha, ping pong tables, and nap pods but not a clear paid time off policy, take a good look in the mirror and ask yourself if you are really pro-worker. If you’re doing unlimited PTO to save money at the early stages of a startup, own that and explain it an all-hands meeting. Take great pains to ensure people are taking vacation and not getting burned out.
There is no excuse for a huge, profitable, billion-dollar public company to have a policy like that (I’m looking at you Hubspot, LinkedIn, Adobe, Netflix).
If you have unlimited PTO at your company and you are convinced your workers really, really love it because you do things differently, then consider an anonymous survey of employees who have been there a year or longer and ask if they really like it, what would make it work better, and then implement those changes.
If you are a leader not responsible for corporate policy, then the best thing you can do is take vacation yourself. Take half days on Fridays in summer. Whatever you do, do it publicly. This sends a signal to your employees that it’s okay for them as well. Check out entirely. Do not respond to emails. Approve all vacations within reason. Lead by example.
Happy Labor Day, y’all!
If you still want to work with me after learning about my not-so-secret pro-worker side, book a call with me!