More and more companies are including perpetual paid time off in their job vacancies as it is an enticement popular with Millennials and Generation Z workers. But whether that’s really that great, you should think again – studies show that employees with unlimited vacation days often take fewer days off. Why should that be so? I will explain.
What is Unlimited Paid Time off?
In contrast to conventional allowances for vacation days (13 days on average in the US) and Sick Days, Unlimited PTO makes no such distinction and has no set limit on the number of days you can withdraw. However, the term “unlimited” is a bit of an exaggeration as most companies have rules or guidelines that prevent misuse of the guideline. This could include notice requirements for fully booked days, blackout periods when dates cannot be booked, or even restrictions based on the number of days you have already worked. Usually applications have to be approved by a manager who, when the going gets tough, has the final say on whether or not they are approved.
Why unlimited paid free time isn’t so great
The biggest problem with unlimited paid free time is that people tend to take less free time compared to traditional vacation arrangements. A study by Namely found that employees with unlimited PTO took an average of 13 vacation days, compared to 15 days for their colleagues with fixed PTO. Why should that be? Without clear guidelines on what is acceptable, most workers take less time not to appear lazy or otherwise seen as a policy abuse.
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Like so much in work culture, actions are louder than words. Unless managers provide clear (and frequent) communication about what is really acceptable, most employees will follow what everyone else is doing based on how they read the existing corporate culture.
For example, if you’re a potential new hired employee who’s nervous about sticking your neck out, you’re even more likely to stick to the line. In the worst case, workaholic employees set the tone, causing workers to compete with one another to prove who needs the least vacation days, which brings the benefits of unlimited PTO for employees who want to adapt while also offering a work-life Want to maintain balance, effectively nullifies.
You cannot be paid out for unlimited PTO on your departure
By outsourcing vacation planning to managers and employees, the employer benefits in two ways:
- It’s cheaper to run: With traditional vacation days, free time is guaranteed, which means that HR departments have to keep track of the vacation calendar and settle accruals and carry-overs. With unlimited PTO, an employer doesn’t have to pay off unused vacation days when you leave the company – a sum that can be worth thousands of dollars.
- Increased productivity: If employees are not compensated for the vacation days not taken, the employer will benefit most from this additional work.
What to look out for with an unlimited PTO
That’s not to say that an unlimited PTO is bad. The flexibility it offers can be more convenient than fixed vacation days. For example, a few years ago I had to take an unexpected day off late in the year for a funeral and was turned down by my employer because I didn’t have vacation days (luckily my manager just turned a blind eye and let me take the day off).
However, despite this flexibility, you want to confirm what type of unlimited power take-off a potential employer is offering. To protect yourself, ask your future manager how many days, on average, people take off. Before accepting a position, ask if they have written information about their policies, including eligibility, how requests are made, and permission restrictions. And remember: unlimited power take-off isn’t a benefit – it’s a guideline.
