Unlimited Paid Time Off: Pros and Cons
Unlimited paid time off sounds like the wildest zoomers dream come true. Yet, the concept is not as new as it seems. Many early-stage startups offer us this blessing. But is it a blessing in disguise? And should you, as a founder, create this business world oasis for your team?
Unlimited PTO establishes trust in your employees and decreases administrative responsibilities. But, on the other hand, employees can abuse this opportunity or even, on the contrary, take little or even no time off.
So does unlimited vacation work for startups? We’ll review the policy’s pros and cons and provide ways to minimize its downsides.
Hands-on approach: Netflix
Let’s dive into Netflix’s experience with a controversial employee policy that other companies would try to copy. The policy eventually became known as “unlimited vacation.”
The employee noticed they did not track hours worked per day or week. So they suggested doing the same thing with days of vacation per year.
Hastings, one of Netflix’s co-founders, later wrote, in the information age, what matters is what you achieve, not how many hours you clock,”. Hastings shared the insight that many of the company’s most significant innovations happened after people came back from vacation.
Advantages of unlimited vacation time
Startups pride themselves in encouraging independence, trust, and self-awareness, giving employees full autonomy to take vacations. Although it looks good as a part of the employer branding, they use it as a recruiting tool and an investment in long-term productivity. The effect of vacation time on productivity is well-documented: Taking time off boosts concentration, creativity, and enthusiasm.
Unlimited PTO does the following:
Unlimited PTO gives your workaholic employees to recharge mentally and emotionally. Unfortunately, the startup mentality silently encourages employees to work extended hours at the office and often take work home.
The thing to consider: 15 days’ vacation may be satisfactory for a 9-to-5 workplace, but it may not be enough for 50- or 60-hour workweeks.
Trust is the basis of any relationship.
Employers would often sign up for uncertain, more challenging, and even lower-paid startups to get more independence and confidence from their managers.
Unlimited PTO is the ultimate way to show employees that you are not a control freak and don’t care how work gets done as long as it’s done.
Matches a flexible vibe of startup work
The social contract in many startups is “We’re asking you to work more than a large company; we’ll let you choose how and when you work.” A person is likelier to survive a 12-hour workday if part of that work is done remotely and doesn’t start at precisely 8:00 every day. So they can break it up with a two-hour gym session or decide to book a quick session with a shrink.
If you have remote workers and flexible work hours, unlimited PTO matches the GTD narrative.
It suits the all-or-nothing startup work cycle.
Getting ready for a launch can require around-the-clock work involvement from the entire company. Cramming mode productivity, though, isn’t sustainable in the long term. According to research, employees who consistently put in more than 50 hours a week are less productive than those who only do so rarely.
Unlimited PTO lets employees recharge after three 60-hour-work-week sprints.
Sick people belong at home.
Suppose your company has a policy of a set number of vacations. Or splits out vacation and sick days, workers may come to work even when they’re not feeling well rather than use the precious time off.
“In sickness and in health” only applies to married people. Contagious workers in the office should be labeled “productivity killer”.
And lastly, imagine how depressing it is to spend your vacation days on sick leaves.
Get rid of paperwork. Well, almost.
Filing for vacation > getting it approved > tracking vacation time can be clunky. Especially for startups with no or small HR teams.
Unlimited PTO lets you avoid these administrative burdens.
It cuts down on the awkwardness.
It works out the questions like:
- payouts for employees who leave the company,
- managing vacation for those who join mid-year, half-days,
- and working holidays for an extra vacation day.
Unlimited vacation allows you to avoid it and become less afraid of being sued for unpaid PTO accruals.
Works well for the Employer Branding
You might have a long way to go to reach an employer-matched 401(k). But as unlimited PTO becomes more popular, you can use it for advertising this vacation policy to potential new hires.
It could be a selling point. The hustle culture is slowly dying since a well-rested employee is worth three overworked ones. Unlimited PTO policy gives you a leg up compared to larger companies.
Offer unlimited PTO, and let it become part of your company culture.
Reverse psychology trick: prevents employees from taking a vacation.
Don’t look at this as a way to trick your workers into being eternally devoted to your company.
Ironically, one of the biggest concerns with unlimited PTO is that workers may not take it.
Many people can quickly turn on the “work hard” facade and gain managers’ favor even as they fast-track their burnout. Keep an eye on the ball; taking a break benefits the company long-term.
A 24/7/365 working ideal is unhealthy for employees and employers.
But what if it’s unfair and subjective? Well, so is life.
“Unlimited” usually stands for “according to manager’s approval.” The approach is entirely sensible, allowing managers to time breaks around crunch times and other teammates’ schedules.
It revolves around subjective judgments, certain managers may be stricter or more likely to grant requests from certain employees, but there is a way out.
Communication is vital: Managers must create parameters, like how many team members can be out at a time and warnings for lengthy vacations.
And team members need to communicate to let other folks know if they’ll be out of touch and ensure they won’t hold up anything time-sensitive.
It puts a responsibility on one-person teams.
True. If you have precisely one salesperson, engineer, or social media manager, it can be challenging to cope when they’re away. But also, what will you do when they lose it? To avoid this nightmare scenario, you must have a plan-B, like outsourcing people to take over the processes or automating operations to allow your one-person teams to chill.
Can be abused
Abusing unlimited PTO is a symptom, not a condition. It indicates that an employee you have chosen is aligned with the company’s values and does not want to be there. So if it is a poor fit, this is a sign of the culture needing readjustment, not a mark against the policy itself.
How to avoid unlimited PTO pitfalls
Numerous studies demonstrate the advantages of unlimited vacation time for employers and employees. However, you could eventually need to execute the policy even if you’re not on board to draw in top personnel. Then can you get the rewards while minimizing the drawbacks?
Ensure that “unlimited time off” doesn’t mean “no time off” since it forces your employees to take time off. A/B-test out several regulations, depending on your industry:
- Vacation rewards: give staff a $1,000 bonus to encourage them to go on vacation.
- Shut down your office. The week between Christmas and New Year’s is frequently a time to do so.
- Fridays with a half-day or every other Friday off in the summer. Since, let’s face it, a lot of folks leave early anyway.
- Set a threshold on vacation days per quarter. Employees are kept sharp and receive regular recharges as a result.
- Mandatory block leave: must block time off. You might need two one-week breaks or one two-week holiday, for instance.
Set a good example
As a leader, you can encourage your employees to take vacations all you want. But, you know what will get them out of the office?
Going on vacation yourself.
“In the absence of a policy, the amount of vacation people take largely reflects what they see their boss and colleagues taking,” says Hastings. “Which is why, if you want to remove your vacation policy, start by getting all leaders to take significant amounts of vacation and talk a lot about it.”
Take advantage of the unlimited vacation policy – not just for your sanity, but to show your team that PTO is encouraged.
Implement a simple request procedure
One of the benefits of unlimited PTO is to avoid getting bogged down in paperwork. But some clarity helps both managers and employees. For example, outline how early employees should request time off and when they should be in the office. Unlimited PTO is a fun game as long as you know the ground rules. As Monica once said, “Rules are fun. They let you control the fun.”
Build a “next man up” system
We are not living in Beyonce’s “You are irreplaceable” song. If employees think no one else can do their job, they won’t feel relaxed taking time off they’re entitled to. Managers should establish “next man up” systems for their teams so that urgent requests for an absent employee can be forwarded to someone else.
There’s much to recommend for unlimited PTO, from fostering trust to reducing overhead. Implemented correctly, it keeps your employees happy, motivated, and productive.
Take a vacation for their weeks, be sick during your sick times, go to California for your long weekend, keep it under a reasonable amount, and come back happy and change your company to attract top talents. Overall, every founder has their own experience juggling between the two nightmares: everyone’s missing as important deadlines loom or workers turn into zombies after working years without a vacation.