The pros and cons of Unlimited PTO (UPTO)

When the first companies introduced unlimited paid time off (UPTO), the concept was met with raised eyebrows across the board. How could such an idea work? Surely, workers would simply set up shop on the nearest beach and set their out-of-office emails to send automatically until they retired.

Contrary to  predictions at the time, that’s not what happened – in fact, in some cases, it was quite the opposite. Rather than abuse the privilege of UPTO, many workers with UPTO have been seen to take fewer holidays, with some citing feelings of guilt as the main deterrent preventing them from dining out on their UPTO.

So let’s take a look at the pros and cons of the UPTO policy.

Pros

Greater flexibility for workers, leading to greater productivity

The companies that pioneered the idea of UPTO, such as Netflix, did so in order to provide employees with greater flexibility, and to create an environment in which the worker felt trusted to make the right calls and manage their work-life balance responsibly.

It  was hoped that more relaxed approach to paid time off would allow staff the freedom to improve their overall well-being,  and this would, in turn, benefit the company. In many cases, this has paid off, with worker morale and productivity levels rising.

Attractive to top talent

UPTO  can help your business to appeal to top talent. According to Factorial HR, the number of jobs on Indeed offering unlimited PTO increased by 178% between 2015 and 2019.

Offering UPTO can set you apart from your competitors, as more and more potential employees view it as a massive perk. Forbes even noted that 51% of surveyed employees recently noted that they would take a 10% pay cut if they could have UPTO.

Cost efficient for employers

Due to greater work-life balance and increased productivity, employers can also wave goodbye to paying out untaken PTO when offboarding employees. Such a move can result in significant long-term savings.

Cons

Negative financial impact on employees

As established in the ways above, the introduction of UPTO may be financially beneficial for employers. However, employees can face losses – as they lose the allocated number of PTO days that they can accrue or carry over into the next financial year.

For  example, if an employee is laid off after nine months of working - during which they took no time off - they are not entitled to be paid out their unused PTO.

Scope for burn-out

If introducing UPTO, it is crucial to ensure that your staff feel comfortable taking time off. Lead by example and ensure you take at least 15 to 20 days off per year. For instance, if workers see their colleagues taking a low number of PTO days, they may feel pressure not to avail of their own PTO due to seeming lazy or less committed than their co-workers – and may fear that this will go against them when their performance is reviewed.

Employees taking less time off in light of UPTO and, as a result, suffering the fallout has been seen in a number of organisations. In fact, in some cases it has led to the scrapping of the UPTO model in favour of a standard PTO allowance.

Difficult to manage

Introducing UPTO can lead to confusion and scheduling conflicts, if too many employees take time off at once. The business runs the risk of being understaffed or delaying projects, unless the correct measures are taken.

Ensuring that you set expectations around notice periods, length of time taken, and approval processes can help you to streamline the introduction of UPTO.

UPTO is still a relatively new concept, with a relatively low uptake. So, whether or not it’s the future of PTO remains to be seen. But it’s always worth considering pioneering working models, when striving for excellence in your business.

If you’re an employer who requires support from a dedicated global HR provider, contact our team today.