Unlimited PTO – Is It Right For Your Company?

March 14th, 2017 by

Business executives and HR professionals alike continue to explore ways to improve their organizations’ culture to drive both employee engagement and business results. One such way is by providing employees increased flexibility to improve the balance between their work life and personal life. The following information will provide key insights to help guide you in contemplating the very popular benefit of Unlimited PTO.  As your organization’s HR Business Partner you will want to be driving this conversation, not simply reacting to it.

What You Should Know about Unlimited PTO Plans

  • Unlimited PTO is a very popular topic these days.  But despite all its popularity only approximately 1% of U.S. companies* have an unlimited PTO plan in place.  This is clearly not a trend!
  • This 1% includes the likes of Netflix, GE, and LinkedIn. These are all well managed and results based businesses that compete aggressively for very targeted highly qualified and talented employees. These organizations also offer top tier compensation and benefits to their employees.  In consideration for these rewards, employees typically work very long days each week to achieve the desired results.
  • Culture First: Unlimited PTO works best in organizations’ cultures that values accountability, trust, and teamwork. An unlimited PTO plan, in and of itself, is not the catalyst that will seamlessly transition your organization to this state.  You must first build a culture of trust and accountability that will support the high degree of employee flexibility that an unlimited PTO plan requires – this is critical!  (Talent Management, July/August 2016)
  • Employees that are provided an unlimited PTO benefit typically do not take any more time off than in their prior traditional plan; in some cases, they are actually taking less time.
  • A 2013 time-off study conducted by Oxford Economics revealed that U.S. workers use on average 77% of their annual PTO accounts (or 16.2 of the 21 days allotted annually – leaving nearly 5 days on the table).
  • Although employers are not seeing a noticeable uptick in days off under the unlimited PTO approach, they are noticing that employees are altering how they are taking time off. For example, more employees are taking extended 4-day weekends. This is in part because families tend to be more spread out today and travel is required to attend family events. (Fortune,  March 2016)
  • Employees have a high degree of empowerment under unlimited PTO. However, these same employees also tend to be very diligent about their PTO decisions.  They want to perform high-quality work and they are also keenly aware their organization’s cultural norms (trust, accountability, teamwork etc.) and peer behaviors. These employees tend to make responsible choices that balance out business priorities and personal needs.  In many organizations however a collaborative discussion between employee and boss is required prior to the time off.

Tips for implementing an Effective Unlimited PTO Plan

  • Link your plan to your company’s culture and values. Your values will need to include: accountability, trust, and teamwork. As mentioned above, if your current culture is void these values, you will need to lead your business through a change initiative to lay this critical foundation.
  • Provide guidelines around how time-off requests get approved. Simple guidelines can help employees know when it is appropriate or not to request time off.  This is particularly helpful in the beginning stages of your roll-out.
  • Ensure your employees know that time off is a two-way street: employees receive increased time off flexibility and in return they perform at high a level ensuring their deliverables are completed on time. Further, they ensure that their teammates don’t feel abandoned during the employee’s time away from work.
  • Consider a pilot plan and be clear with your employees of your intent. Think this through thoroughly as rescinding an employee benefit, even a pilot program, can have adverse employee relations repercussions.
  • Consider naming your program something other than “Unlimited PTO.” “Personalized PTO” may be a viable alternative or other names that convey the overarching purpose of responsible employees making good decisions about their work and time off.
  • Drive Trust: shift your attention from the clock to contributions. Focus on your employees’ results and the success of the business – not how much time your employees are taking off.

Unlimited PTO plans are not for every company, in fact, they are not designed for many businesses in their current state. Transitioning to an unlimited PTO plan requires much thought, planning, and hard work to lay the proper foundation (culture) to effectively support this type of flexible plan. Does your current culture drive results through accountability, trust, and teamwork?

Whether an unlimited PTO plan is right for your business or not, this may be the time to review your total rewards plans as well as your culture. CAI’s Advice & Resolution team can help you think through these issues to discuss the best options for your company. Learn more about the advantages of becoming a CAI member.

Rick Washburn leads the Advice & Resolution team at CAI. In his role, he advises executives and HR professionals on strategic and organizational issues, tackling subjects ranging from employee engagement to talent management. With his 25 years experience in HR management, Rick is uniquely poised to advice and lead businesses to successful HR strategies

 

 

*Source: SHRM

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