Increasingly, companies include unlimited paid time off as part of their job offers, as it’s an enticement popular with millennials and Gen Z workers. But you’ll want to think twice about whether it’s really all that great—studies show that workers often take less time off with unlimited vacation days. Why would that be so? I’ll explain.
What is unlimited paid time off?
Unlike traditional allowances for vacation days (13 days on average in the U.S.) and sick days, unlimited PTO makes no such distinction and has no set cap on how many days you can take off. The term “unlimited” is a bit of exaggeration, however, as most companies have rules or guidelines that prevent you from abusing the policy. These can include advance notice requirements for days booked off, blackout periods in which dates can’t be booked, or even limits based on how many days you’ve already worked. Typically, requests must be approved by a manager that—when push comes to shove—has final say on whether you get approved or not.
Why unlimited paid time off ain’t that great
The biggest problem with unlimited paid time off is that people tend to take less time off overall, compared to traditional vacation policies. A study by Namely found that employees with unlimited PTO took an average of 13 vacation days, compared to 15 days for their fixed PTO counterparts. Why would this be? Without clear guidance on what’s acceptable, most workers end up taking off less time to avoid appearing lazy or otherwise be seen as abusing the policy.
Like so many things in work culture, action is louder than words. If managers don’t provide clear (and frequent) communication about what’s truly acceptable, most workers will follow whatever everyone else is doing based on how they read existing company culture.
If you’re a prospective new hire that’s nervous about sticking your neck out, for instance, you’re even more likely to toe the line. In a worst case scenario, workaholic employees set the tone, which leads to workers competing with each other to prove who needs vacation days the least, effectively nullifying the benefits of unlimited PTO for employees that want to fit in while maintaining a work-life balance.
You can’t be paid out for unlimited PTO when you leave
By offloading vacation scheduling over to managers and employees, the employer benefits in two ways:
- It’s cheaper to run: With traditional vacation days, the time off is guaranteed, which means that HR departments have to track the vacation calendar and account for accruals and carry-overs. With unlimited PTO, an employer doesn’t have to pay out unused vacation days when you leave the company—a sum that can be worth thousands of dollars.
- Increased productivity: If employees aren’t compensated for the vacation days they don’t take, then it’s the employer that benefits the most from that extra labor.
What to look for in unlimited PTO
That’s not to say that unlimited PTO is all bad. The flexibility it offers can be more convenient compared to set vacation days. As an example, a few years back I had to take an unexpected day off late in the year for a funeral, and was turned down by my employer because I was out of vacation days (mercifully, my supervisor just turned a blind eye and let me take the day off).
Even with that flexibility, however, you’ll want to confirm what kind of unlimited PTO a prospective employer is offering. To protect yourself, ask your prospective supervisor how many days people take off on average. Before you accept a job, ask if they have any information about their policy in writing, including eligibility, how requests are made, and approval restrictions. And remember: unlimited PTO isn’t a perk—it’s a policy.