HR, benefits and the myth of “unlimited PTO”
Posted on | December 11, 2011 | 4 Comments
One of my clients is an early-stage tech company doing some important and industry-leading work in its field. They are currently hiring, and have openings for some pretty smart people. They are also competing with some well-known companies seeking similar talent — talent that is in-demand and relatively scarce even in the current market of 8 to 9 percent unemployment.
They’re re-thinking the organization and messaging on the company’s website — including some very dry, boring, standard language that now exists on their “Careers” page.
In a discussion with their HR person, who is looking to do a better job with that page, and their overall recruiting efforts, it came up that at least one of the area’s hot companies notes on its careers page that it offers employees “unlimited paid time off.” There is language that follows that suggests that this means “within reason” and as approved by the department/manager.
In further discussions with my client’s HR director, though, it became clear that this offer might help with recruitment; but in practice, it poses challenges for both the company and its employees. This was further confirmed when she met up and discussed the realities of unlimited PTO with an HR person from the company making that offer.
The insider shared that, in reality, that policy leads to employees actually taking *less* time off that they might under different policies. Why? Several reasons.
Primarily, because the vagueness of “unlimited (within reason)” leaves employees and their managers unclear on what is really acceptable. That leads employees to take fewer days, and different managers with different takes on what is reasonable.
You can certainly understand the concern of employees, given the economic situation and the fact that there are lots of people seeking jobs, and lots of companies looking to keep costs down. Anyone not clearly indispensable to their organization is likely at risk, and anyone truly taking advantage of “unlimited” time off is perhaps calling undue attention to themselves. Some who take time may generate resentment among others who don’t, or who have managers who are not as free about approving time off.
As a result, the firm is re-evaluating how it educates its managers on what is acceptable when it comes to time off, and looking at the policy as a whole to see if they might need to change it.
Have you worked at a company that offers “unlimited paid time off?”
Have you, as an employer, offered unlimited time off?
Have you, as an HR person, managed a workplace with unlimited time off?
What sorts of challenges did it present? What sort of policies helped to make the policy consistent and manageable for everyone?
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4 Responses to “HR, benefits and the myth of “unlimited PTO””
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January 5th, 2012 @ 11:34 am
I have never worked for a firm that advertises unlimited PTO. Let’s just think about this for a minute. If your employee is salaried, they are paid the same wages and it doesn’t matter if they work 40 hours, 80 hours, or 20 hours. So in essence they already have unlimited PTO.
Having a specified PTO limit helps the employee know how much time they have available for vacations or sickness. It also helps a business plan their budget for the coming year. If you know how much time is actually available as PTO; the history of PTO usage in the company; and projected new hires; you can then extrapolate what your accrued PTO costs (liability)will be for the new year.
January 5th, 2012 @ 12:17 pm
Thanks, Diana. I saw a story about a company that offers this that made national news as the year ended – must have been a slow news week. http://baltimore.cbslocal.com/2011/12/28/no-vacation-limit-for-wedding-sites-employees/
I think the typical way it works, especially during challenging economic times, is not that they have theoretically unlimited time off, but that they have the opportunity to work unlimited hours for no additional compensation. If you are salaried, just TRY working 20 hours instead of 40, and see how that goes over. You will likely end up with unlimited time off to accompany no job, and no salary.
Many companies are proactive and flexible about offering comp time, but those policies are often fuzzy. If you get two weeks of vacation, you may be able to ask for an 11th day, but you may be docked the pay for that day.
Excellent point on the accounting side from the company perspective. It seems to me that smaller, more dynamic companies are the ones more likely to have this policy and make it work. And as millenials become a bigger part of the work force, data shows they tend to value things other than monetary compensation, so we may see more of this.
January 6th, 2012 @ 10:44 am
Another article on the subject I came across today:
http://www.inc.com/joe-reynolds/give-your-employees-unlimited-vacation-time.html
January 9th, 2012 @ 10:03 am
There is no need to extrapolate PTO costs. There are 2080 regular work hours x hourly wage = yearly salary. If you provide PTO, then you are paying for all 2080 hours whether the employee worked them or took PTO.
For hourly, it’s simple, if you are here, you get paid; if not, then you don’t. Look at what PTO really does for hourly employees, it balances their yearly pay across the year for them. The employees get paid once a week, so they have to make sure their funds from one check will carry me until the next check. With PTO, the employer takes the actual hourly rate, subtracts a little (instead of paying $22.61 per hour, they are paid $20.00 per hour) so it can be paid during PTO.
With salary, this becomes an employee / manager relationship responsibility. I’m salary, and I have a job to do. As long as I’m getting my work done when it needs to be done at the quality it needs to be, then who cares how many days I do not come in to work?
It’s about mistrust, rules and control. Someone does something that someone else doesn’t like so they make a rule or law to “prevent” it from happening again or provide a means to punish those who break it. The bottom line is people should hold themselves accountable and if they abuse the system, then managers should come in and hold them accountable.