What do breadsticks, cell phone data, and vacation have in common? They all sound better with unlimited in front of them. Unlimited is a captivating word that unlocks our inner imagination.
When people picture unlimited…anything, they fall into a deep spell of fancy. Minds swell with thoughts of the utopic life they will live, never running out of whatever chosen noun “unlimited” precedes. Rarely; though, do people ever think about the downside to something that is unlimited.
Unlimited vacation (aka unlimited PTO, discretionary time off, or limitless vacation) offers tremendous possible advantages. It also carries very real disadvantages.
Over the next two weeks, we will detail the ins and outs of discretionary time off plans. This article is part one. Part one breaks down the advantages and disadvantages of an unlimited vacation policy.
Positives of Unlimited Vacation
There are several advantages unlimited vacation can offer your employees and company as a whole. These benefits can give your business a definite edge over your competition.
Recruitment & Retention
The first benefit of unlimited vacation is that it can improve your recruitment and retention. It is estimated that only one or two percent of companies in the U.S. offer unlimited vacation, according to the Society for Human Resource Management’s (SHRM’s) 2016 Employee Benefits Report.
Offering limitless vacation is a powerful recruiting tool that both large and small employers can provide. Small companies can use discretionary PTO to compete with larger organizations that spend more money on their total benefits package.
Large businesses can use it to stand out from the pack and separate themselves as a more generous employer. An unlimited vacation policy can also aid recruiting efforts by demonstrating the care your business shows its employees.
Limitless vacation shows recruits that you care about your employees, their work-life balance, and their overall well-being.
Many employees will be more attracted to your company because of unlimited PTO. These workers will want to stay longer too. Your staff is less likely to leave if your limitless vacation policy is implemented and administered correctly.
Any time an employee weighed a different job offer they would have to consider the other job’s vacation policy, and compare it to your unlimited one. Three weeks of vacation is nice, but compared to the promise and allure of unlimited vacation, it’s not so special.
Unlimited vacation grants employees a greater amount of flexibility with their time off. This flexibility gives your staff a better ability to maintain a healthy work-life balance. Also, most discretionary time off policies require an employee to finish his or her work before their time off request is granted.
By this definition, any employee on vacation should have all of his or her work done. That employee should, therefore, focus solely on their time off. This focus maximizes the benefits your employees and company receive from that employee resting and relaxing.
So, under an unlimited vacation plan, employees have more flexibility to choose when they use their PTO, and they also receive the maximum advantages this time off, affords.
One way unlimited PTO benefits you’re your business is by providing a boost to employee morale. This policy can be more valuable for what it says about your company than what it actually does.
Discretionary time off shows your employees that your business takes a truly holistic approach to its employee benefits package. Your firm is acknowledging the fact that each of your team members has a life outside of work, and that life can’t always be planned out.
Similarly, unlimited PTO also expresses a level of trust throughout your company. Responsibility for completing tasks and projects, regardless of any time off taken, is now squarely on the employees
Your business is not only trusting employees to use an acceptable amount of time off but is also trusting them to be responsible for their work. If your hiring process is effective, this trust equates to increased productivity.
Lastly, limitless vacation shows more respect for your workers, as individuals. Every person takes time off at different dates, and for various reasons. Discretionary PTO tells your staff you appreciate the fact that each individual’s personal life is different. Your firm knows that PTO usage reflects this individualism.
Unlimited vacation shows your employees that you are conscientious of the volatility of their personal lives, trust them, and value their individuality. All of these factors work to improve employee morale.
Employee morale is crucial to your company’s productivity. According to a study by Gallup, actively disengaged workers cost the U.S. an average of $450 to $550 billion every year, in lost productivity, absenteeism, and other low morale issues.
Although it may seem counterintuitive, there are several ways that discretionary PTO can save your firm a significant amount of money. The first means of saving money is through gaining back the most precious resource ever, time.
Your business will gain back all the time it previously spent on tracking employees’ time off spent, and time off accrued. This scenario frees up your HR professional, manager, or whoever was in charge of tracking time off, to focus on other work. According to Inc., Ask.com claims that its unlimited PTO plan saves 52 HR hours every year.
Even bigger cost savings are available, though. If your company allows employees to accrue time off, it could be liable for large payouts when an employee quits or retires. This unused and accrued time off can be a massive liability on a firm’s balance sheet, according to SHRM.
Research from Project: Time Off, of 114 publicly traded companies found that the average vacation liability was $1,898 per employee. According to Oxford Economics, U.S. companies in total carried over $224 billion in accrued paid-time-off costs forward on their books in 2014.
Under an unlimited PTO plan, your business will no longer have this, potentially massive, liability on your books.
While all of the above advantages of unlimited vacation are true, there are very definite negatives to these plans that any organization needs to consider before implementation.
For most people, and most businesses, change is difficult. Change is especially difficult when it involves money. So, many of your employees may have a serious problem with your company switching to an unlimited PTO plan, especially if it costs them money.
If your company previously operated under a plan that allowed team members to accrue PTO, they could potentially lose thousands of dollars. A switch to unlimited PTO that effectively eliminates these accrued days could be largely divisive.
This controversy happened to Tronc., the parent company of the Los Angeles Times. In November 2014, The Times announced they were adopting a discretionary time off policy.
Many employees were angered because the plan removed the monetary value of the time off they had accrued. A few weeks after the announcement, Tronc. rescinded the plan.
The switch to discretionary PTO can be a massive change for some businesses. To ensure plan success, it is best if your firm has a culture of flexibility and change. A more traditional organization is more likely to resist a switch to a limitless vacation policy.
Guilt and Resentment
Switching to an unlimited PTO plan may have the unintended consequence of fostering guilt and/or resentment throughout your office. Some employees will feel guilty about taking any time off without a precise definition of how much PTO they are expected to use.
Or these employees will take time off, but get reduced or negligible effects from the break, because of their guilt. Similarly, resentment between colleagues may become more pervasive throughout your firm.
Employees, who witness some of their coworkers taking more time off than they are taking, may grow to resent those who take extended or frequent breaks. Therefore, those who are unsure of how much time off to use may become jealous of those who seem to have little trouble exercising their use of unlimited PTO.
Guilt and resentment are bad for business. Both emotions eat away at team morale and can have an adverse effect on employee engagement and satisfaction.
Misuse of the system is always a concern for a company looking to change to an unlimited time off policy. The last thing you want as an employer is for even a small fraction of your staff to unfairly abuse the generosity of your business.
If system abuse became widespread, your company could potentially face a massive productivity problem. Too many team members taking advantage of unlimited PTO could result in late or incomplete work, inter-team conflicts, and other organizational deficiencies.
One possible side effect of unlimited vacation, whether intentional or not, is that your employees may end up taking less time off.
An unofficial poll by Boston Globe reporter Scott Kirsner, revealed some interesting results regarding the actual amount of time off employees take under a discretionary PTO plan.
According to this poll, 49 percent of respondents, who are part of an unlimited PTO plan, take about the same amount of vacation as they did under a traditional vacation plan. Additionally, 30 percent revealed they take less time off.
Similarly, a study by The Creative Group found that 56 percent of employees believe that even if their company offered unlimited PTO, they wouldn’t use any more vacation days than they currently do.
If your employees aren’t taking enough vacation, your business will suffer. Employee creativity, engagement, and productivity all increase after vacation. Paid time off gives employees a stress-free opportunity to recharge their proverbial batteries.
Your brain functions at higher levels, the more relaxed you are. Author Shawn Achor found that when “the brain can think positively, productivity improves by 31 percent, sales increase by 37 percent, and creativity and revenues can triple.”
If your staff doesn’t take as much time off as they need, it is extremely difficult to maximize their performance.
You can overeat on breadsticks and ruin your dinner, or worse yet spoil breadsticks for yourself (Imagine the horror!). You can pay much more for unlimited data, and only end up using a small fraction. While the downside to unlimited vacation is more nuanced it is no less real.
Ultimately, it is up to your company’s leadership and HR teams to decide if the advantages of a discretionary time off policy outweigh the disadvantages.
Tune in next week for a detailed breakdown on how to best set up an unlimited vacation policy and maximize its benefits.