Implementing an Unlimited Employee PTO Policy

The Latest in Paid Time Off Trends

Unlimited PTO is just as it sounds, unlimited. Of course, nothing panics supervisors or management more than the thought of employees spontaneously choosing NOT to work! Unlimited PTO should be thought of as scheduled vacation time. Time off for vacations is planned and scheduled with a supervisor’s buy-in. If the employee has to complete a project by a deadline, then their vacation is planned around that need with the supervisor.


Case Study – Netflix

When Netflix took the company public, they found themselves having to account for the large amount of leave that employees had accrued. Rather than come up with a complex system and the administrative hassle needed to track this accrued time, the company chose an Unlimited Paid Time Off system that negated the extra paperwork. However, not all Netflix employees were given access to this program— and those program criteria are discussed later in this article. Netflix is an example of an employer being emulated because of their focus on rewarding employee performance while refraining from measuring non-performance indicators like the amount of PTO taken by employees. Unlimited PTO, like the focus on performance, has gained popularity as employers try to find innovative methods to reward employees while maintaining productivity.


NOT a substitute for Sick Leave

An Unlimited PTO policy should not be used as a substitute for sick leave. If your employees work in Oregon, any policy that is used as sick leave has built-in legal protections for the employee. For example, someone that uses sick leave cannot be penalized for missing work. A supervisor would want to be able to penalize an employee that takes too much non-sanctioned vacation time and thus misses a deadline. To avoid confusion and a possible lawsuit, set up a separate sick leave policy to comply with state law and administer the Unlimited PTO policy based on your company’s needs and culture.

NOT a substitute for Long-term Protected Leave

Some leave requests may fall under protected leave like the Family Medical Leave Act. Supervisors should refer long term requests for leave to the HR Department. If the leave request is granted under FMLA, HR must track this time as directed by Federal law.


Who fits an Unlimited PTO Policy?

For whom does an Unlimited PTO plan work best? Start by eliminating hourly staff (e.g. fuel attendant) if having an employee at work and servicing the customer is a company priority. Consider implementing an Unlimited PTO policy for employees that do project-based work or in cases where the work product is measurable. These may include jobs that are being done at the office or remotely. Project-oriented employees often approach their work schedules like artists—working long stretches at a time or working during off hours when creativity is in free-flow.


Setting-up Program Guidelines of Supervisors

If implementing an Unlimited PTO policy, let supervisors and employees know exactly what is expected to be accomplished within their workload calendar to allow for leave planning purposes. Motley Fool (a financial analysis company) does this with something called a Fool’s Errand. One name is chosen every year and that employee must take a two-week vacation. This program shows that taking a vacation is part of the company culture with the added benefit of forcing key employees to make sure everyone is cross-trained before they take their “leave.”

It is suggested that employers require someone from HR to be looped in when leave exceeds some specific number of days at one time.


Limiting Unlimited Leave

Obviously, leave cannot be given to employees indefinitely. Employers will need to set some limits and determine a hierarchy for approval. For example, employers may want to limit the supervisor’s authority to grant leave to about a month. Time longer than the specified amount can then be reviewed by an HR Department and/or a Legal Department.


Pros & Cons – Employee Perceptions of an Unlimited PTO Program

The downside of offering this policy is that you must watch for possible conflicts with company culture so that your company does not end up having two classes of employees. Coworkers might expect researchers and engineers to take retreats or take extended educational “leave”, but if your company’s management and hourly employees are functionally equivalent, the lack of clearly defined differences might alienate a portion of your workforce. In short, the pros of implementing an Unlimited PTO policy helps reward those hardworking employees who rack up large amounts of unused leave time. Implementing this type of policy allows you to acknowledge those efforts and show your company’s appreciation.