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Is Unlimited Paid Time Off Right For Your Organization?

Traditionally, paid time off benefits are grouped into three different buckets – vacation, sick, and personal days. Employees had to differentiate when to use a personal day instead of a vacation day. To make it easier for employees, organizations are now lumping those time off categories into one general paid time off (PTO) bucket. Some organizations take these practices a step further by offering unlimited paid time off.

What are the advantages?

There are many reasons why organizations are implementing unlimited PTO policies. The 2017 State of the American Workplace Report from Gallup showed that 53% of employees are looking to have greater work-life balance. Organizations are now re-evaluating what that means and some are using unlimited PTO as a marketing tool to attract and retain talent.

One of the main reasons why companies may offer unlimited PTO is to give their employees the flexibility to take time off whenever they choose. This eliminates the added stress of waiting for their time to accrue or having to use up their time at the end of the year.

With unlimited PTO, there is no accrual process. Some organizations see this as cost saving-benefit where they spend less time on administrative procedures of tracking time off. There is an additional advantage of not having to pay unused PTO days upon termination of employment.

The organization can also convey an overall trust of their team with this policy. This instills a sense of responsibility for employees to not abuse the benefit and to get work done. If trust-building is a part of the employer’s culture or aspiration, having this benefit can support the strategy greatly.

What concerns are there?

Unlimited PTO is hard for some organizations to envision as they may wonder how employees stay on top of their work without being a burden on the organization.

Workplace studies have shown that, under unlimited PTO structures, employees take about the same time off or less time off than the traditional accrued practice. Supervisor training in how to handle this policy consistently is key if we want to ensure a successful rollout.

There are also potential compliance issues that need to be considered. One of them is ensuring that mandated benefits are still provided as per the law. Organizations must communicate clearly what constitutes time off versus other required benefits such as FMLA, Disability, or NYPFL.

What does unlimited PTO look like for your organization?

Organizations should first evaluate their core values, management practices and beliefs, and see if they can easily be aligned with this new practice.

Employees should also be able to share their feelings about such a policy and what challenges they may see with its implementation. As an example, employees who have been with the organization for a long time may not look too kindly to this policy as it puts them on the same level as someone who was just hired. It is important to address employee concerns before rolling out a new policy. That is why a big part of implementing a successful unlimited PTO policy is communication. Define clearly what employees should expect before they use PTO. Ask employees to request time off well in advance. This helps the team plan responsibilities and deadlines accordingly.

Another thing to keep an eye on is vacation/sick/personal balances that your staff may have before you start with the unlimited PTO policy. It is important to consider paying for those days or giving ample time for days to be used before transition.

Lastly, organizations should re-evaluate and redefine performance/success standards. This policy will only work if there are clear goals, and employees are held accountable for their work and team performance goals in a consistent way.

Unlimited PTO may be the right solution for some organizations that already have an existing culture that encourages the use of time off. Remember to outline clear expectations, procedures, and disciplinary actions when setting up this policy.

Talk to your Kiwi HR representative to evaluate whether this option is a good fit for your culture.

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