Paid time off (PTO) is a benefit employers sometimes offer to their employees. PTO can include leave for vacations or personal days. Offering PTO is not federally mandated in the Fair Labor Standards Act (FLSA), but there are some state-mandated paid sick leave laws. Many businesses still offer some form of PTO.
Many companies simply give employees a few PTO days per year, but employers also have the option to offer unlimited PTO. Unlimited PTO policies allow workers to take as much time off as they need for illnesses and vacation as long as long as it does not interfere with the company’s operations.
Adding an unlimited PTO policy is not for every business. Consider the pros and cons to see if it might work for yours.
Pros of unlimited PTO
First, the pros of unlimited paid time off. Why do employers and employees like this type of benefit?
Saved time for you: As a small business owner, you have other things to worry about besides the time-consuming process of tracking employee time off. Unlimited PTO might work for you If your business accommodates a flexible work schedule and you do not have to find replacements for employees on leave. By offering an unlimited PTO policy, you free up time that you would normally have to spend tracking an employee’s time off and figuring out how much time they have left.
Increased employee satisfaction: When you provide unlimited PTO, employees must become more responsible for getting their tasks done. This added freedom and responsibility can boost morale and workplace satisfaction. Being able to take more time off means employees can spend more time with family and take care of family needs, allowing them to maintain a work-life balance. Allowing employees more time off can also give them a chance to recharge and come back to work with fresh ideas.
Employees take less time off: Businesses that implement an unlimited PTO policy are finding that employees actually take less time off than when there was limited PTO.
It keeps illness out of the office: When employees come to work sick, there is a chance they will pass their illness on to other employees. If that happens, you might have several employees missing from work at the same time due to illness. If employees can stay home without reprimands, they are more likely to keep their germs out of the of the workplace instead of saving their limited sick days for potentially worse illnesses.
Attractive to potential employees: When it comes time for you to hire more employees, unlimited PTO might help you attract quality candidates. Since few businesses currently offer unlimited PTO policy, adding one could help your business stand out from your competitors.
Cons of unlimited PTO
And now to the cons. What should you consider before implementing an unlimited PTO policy?
Employees abusing the privilege: If you give your employees unlimited PTO, you might have some employees that will take days off simply because they can. You should determine a way to tell if employees are abusing the unlimited PTO policy. If an employee does start abusing the unlimited PTO policy, you will have the task of confronting them.
Missed deadlines: As with any business, employees need to be present in order for work to get done. If employees start taking too many days off, deadlines might get missed. Also small businesses already have few employees, so you might need every available worker to show up to keep operating.
Some leave still needs to be tracked: While not having to track employee PTO might sound appealing, you do not get out of tracking all sick leave. You must track leave that qualifies under the Family and Medical Leave Act (FMLA).
Other things to consider
An unlimited PTO policy is not for all businesses. Unlimited PTO might not be for your business if you pay workers an hourly wage. Unlimited PTO would also be difficult to implement in retail, restaurant, or other similar industries that need a certain number of people to be at work at a time.
Businesses in technology or sales might have an easier time adding an unlimited PTO policy. Unlimited PTO might also work well if your employees already have freedom to structure their work time.
If you do opt for an unlimited paid time off policy, consider pairing it with a mandatory time off policy. Mandatory time off requires employees to take at least a certain number of days off from work each year.
Our online payroll software makes it simple for you to pay your employees. Add on our online time and attendance software to easily track the hours your employees work and how much time they have taken off. Try them both for free!
This article has been updated from its original publication date of September 4, 2015.This is not intended as legal advice; for more information, please click here.