The Hidden Costs of Unlimited PTO

The Hidden Costs of Unlimited PTO

If an employer offered unlimited paid time off, most people would likely jump at the chance. According to the Bureau of Labor Statistics, private industry American workers (making up just shy of 85% of all workers in the U.S.) are given an average of 10 paid vacation days after a year of service and 20 days after 20 years. When that’s the standard, is it any wonder that employers can tempt potential employees with limitless holiday time?

However, it appears that organizations with unlimited paid time off policies actually see their employees taking less time off than they did before the policies were introduced. While this may seem like a benefit for the organization, employers considering unlimited paid time off likely care about their employees and are trying to reduce burnout. Burnout is a known contributor to low profitability, but it’s important to acknowledge that unlimited paid time off will not address employee stress, burnout and disengagement on its own.

The Hidden Costs of Unlimited Paid Time Off

Kelli Preston, a registered industrial psychologist, believes unlimited paid time off may deter employees from taking leave as they don’t want to be seen as “slacking off” or underperforming. “With increased workplace demands and fewer workforce resources available over the last few years, employees may have higher workloads than ever, which could mean that employees might feel compelled not to take as much of their annual leave as usual,” she says. If the implementation of the policy is geared towards increasing wellness amongst employees, this would then naturally have the opposite effect if employees are not taking as much leave as before the policy was implemented.

Unlimited paid time off can also result in comparison between employees, even in companies that pledge that leave is not tracked. Preston points out that employees who are not taking as much time off as their peers could begin to resent their fellow team members, since it will fall on them to pick up the workload when someone is on leave. “Employees could also feel less trust in the organization, leading to perceived unfairness and reduced psychological safety,” Preston says. These negative factors would likely influence company culture and the workspace atmosphere. 

How does this impact the organization? 

Far from being the left-field idea that many would expect, unlimited paid time off is now a buzzword amongt companies. Although the idea behind it is grounded in solid science and research, the implementation of this kind of leave policy is only half the battle. 

As indicated, the problems with improperly implemented unlimited paid time off can mean competition, psychological stress, and higher workloads for the employees—these small losses on the individual level will manifest in big ways for the company itself. 

According to the American Institute of Stress, businesses are losing about $300 billion per year due to stressed-out employees, and the presenteeism and productivity expectations that result from the monitoring of unlimited paid time off users is compounding this stress, adding another burden to an already crippling level of workplace burnout. Burnout, in turn, leads to lower productivity and higher employee turnover rate and has even been classified as an ‘occupational phenomenon’ by the World Health Organization.

Should your company consider unlimited paid time off?

Absolutely, provided the requisite research has been done. The main issue, it seems, is that employers are implementing unlimited paid time off policies without necessarily accepting the ethos that comes with it. Some companies are using it to draw in new employees, but have neglected to understand that unlimited leave policies are an effect of an inclusive and understanding workplace, not the cause of it. 

Before implementing anything, Preston cautions that organizational leadership should consider the following: 

  1. First, carefully analyze the company’s existing culture and consider what has and has not worked well previously. 
  2. Conduct research into best practices of other like-minded workplaces, as well as within your workplace, prior to implementation. 
  3. Check your country’s labor laws. “Some countries have very strict rules around paid time off and leave accrual systems,” Preston warns, “so do the research before implementing it into your environment.”

Strategies to make unlimited paid time off work for your company

So is unlimited paid time off a policy best avoided? Not necessarily. Preston recommends the following if unlimited paid time off is to be implemented:

  1. Embed unlimited paid time off in your company culture from the top-down, with senior leadership modeling the practice for maximum adoption. Supervisors should encourage employees to take leave. 
  2. Create parameters and document each employee’s leave to monitor its effectiveness in the organization. 
  3. Provide training and coaching on the new policies.
  4. Facilitate awareness and open conversations, with concerns and complaints fielded in information sessions. 

An alternative to unlimited paid time off: minimum leave

Lee Chambers, the founder of Essentialise, a workplace well-being and inclusion agency based in the UK, opted against an unlimited paid time off policy for his business. “Through research and speaking to those who tried to implement it, we found it wouldn’t be a fit for us. [It] presents the challenge of not taking days off due to wanting client outcomes, not wanting to leave other team members with additional workload, and feeling overlooked in position and growth due to taking more holidays.”

Essentialise’s solution was to implement a minimum leave policy of 25 days instead. “It reinforces the importance of taking holidays for our team’s well-being and gives them a target to aim for as they have a minimum number to achieve. The figure is not an anchor but a guideline, providing flexibility and autonomy,” Chambers says.

In implementing minimum leave, Chambers instituted a reasonable and fair use policy alongside it. The most days taken in his business was 41, the least was 27—and Chambers took 34 for himself. Preston supports this fully, acknowledging that leave should also be modelled from leadership, whether it’s standard leave, a minimum leave policy or unlimited paid time off.

Chambers believes the policy is working well. His team members have different commitments outside of work, so those with childcare or other caring commitments are not being discriminated against. “Each employee is using it differently, and everyone has achieved the minimum, so it is achieving what we set out to do. It’s innovative and a sign of an inclusive culture,” Chambers says.

If you are considering implementing unlimited paid time off in your own business, look past the glossy exterior and consider the implications. Unlimited paid time off could mean a significant shift in the company’s culture. If you’re not prepared, it could actually prove to hinder other facets of your organization, including diminishing the well-being of your employees—the very thing the unlimited paid time off policy was meant to improve.

Photo by @beachbumledford/Twenty20

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Tayla Blaire is a South African freelance journalist and copy/content writer for lifestyle brands. She has written for both print and digital publications such as Refinery 29, Insider, Huffpost, Stylist, Glamour, Buzzfeed, EQ and more.  As of 2022, writing remains her side hustle while she works full time as a high school English teacher. She is passionate about helping others grow their side hustles, especially when they start out as passion projects. You can find her on Twitter or at www.taylablaire.com

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