As companies look for more flexibility for work-life balance, unlimited paid time off (PTO) has gained popularity, allowing employees to take as much time as needed, as long as their work remains unaffected. However, unlimited PTO is nuanced and may not work for every business.
Employers might struggle with the concept of employees having relative free-will when it comes to leave, and the possibility of misuse is a valid worry. So, should you be offering unlimited PTO as part of your absence management?
Here’s what you need to know about unlimited paid time off, including its benefits, risks, and what to consider so you can make an informed decision for your business.
What is unlimited paid time off?
Providing unlimited paid time off (PTO) is about allowing fully paid leave, for whatever your employee requires it for, without the traditional annual entitlement to deduct from. This could be for any time of leave request, including sickness, vacation, or bereavement. This type of policy gives employees the autonomy to manage their own work-life balance, focusing more on output than on the number of hours they work.
Unlimited PTO requires a trusting culture where managers allow employees to be fully in control of managing their own workload, and where employees want to do their job well.
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Is unlimited PTO really unlimited?
No, unlimited doesn’t actually mean unlimited. While there’s no limit on how much leave can be taken, that amount of leave should be considered ‘reasonable’ and won’t interfere with their work. It’s not as if you can afford to allow every employee 365 days off and still pay them all while running a profitable business.
Just like any other leave, you still need to make sure that cover is in place for specific projects and teams—especially during peak holiday periods like school breaks and recognised holidays.
This is why it’s crucial to have an absence management policy in place that clearly outlines the regulations in place for unlimited PTO, specifying what is and isn’t allowed with clear guidelines. Don’t worry, we’ll come back to this in more detail later.
Pros and cons of unlimited PTO
✅ Attracts and retains talent
Work-life balance is one of the most important things you can prioritise as an employer, demonstrating that you’re a business that prioritises the well-being of your employees and values their personal lives. As the job market gets more competitive, offering unlimited PTO is one way to stand out, making your company more attractive to new hires as well as retaining the talent you already have.
✅ Boosts employee morale
Giving people the freedom to manage their workload throughout the year shows a level of trust that not only increases engagement but also boosts morale.
Employees who are truly engaged in their careers and share your company’s values are much less likely to take advantage, which is partly due to their high levels of employee engagement. If your employees are engaged in your business and feel supported, there’s an argument that you should allow them to manage their time most effectively.
✅ Saves HR time and effort
From an HR and payroll perspective, offering unlimited PTO is a great way to simplify leave management. No accrual rates to calculate. No annual entitlement to track against. It not only significantly reduces the administrative burden on your team but also eliminates the need for payouts of unused leave in some instances. Who doesn’t want to save resources and time?
❎ Risk of policy abuse
The most obvious risk that comes with offering unlimited PTO is that people might take advantage of the perk. While most employees are likely to use the policy responsibly—as after all, it’s in their best interest to do so—some may take excessive leave. Not only does this add pressure to the rest of their team to pick up the slack, but it also risks individual goals or tasks not being met.
❎ Under-use
On the other hand, one surprising downside of the policy is that employees may take less time off under an unlimited PTO scheme. Without a defined entitlement to follow, there’s no definitive answer on how much time is ‘acceptable’, creating fear over being judged for taking too much leave. Not only does this create uncertainty (which no manager wants in their employees), but it can also lead to burnout, undermining the purpose of unlimited PTO in the first place.
❎ Potential legal concerns
For this type of policy to work harmoniously across a company, there needs to be well-written policies in place that clearly define the correct procedures. If your unlimited PTO policy is unclear, it can lead to disputes, especially if an employee leaves and expects payment for unused time off. You need to make sure your policy is legally compliant and clearly communicated to avoid any costly misunderstandings.
It can also create issues if it’s not managed consistently in-house. Like if one manager allows full flexibility while another is more structured, it can create feelings of inequality in the workplace, which can lead to costly tribunal claims.
What to include in your Unlimited PTO Policy
To help make unlimited paid time off clear and fair for everyone, employer and employee alike, here’s some key things you need to include:
- A clear definition of unlimited PTO: state what this type of leave means and how it applies to employees.
- Outline the request process: outline the procedure for requesting unlimited PTO, including the amount of notice needed and the approval process.
- Provide any usage restrictions: mention any restrictions on usage, such as not taking time off that negatively impacts job performance or project management.
- State the minimum days to be taken: include a minimum number of unlimited PTO days that employees are expected to take each year.
- Separation from other leave: clearly state that unlimited PTO is separate from other leave policies like parental leave or jury duty.
- Define the policy purpose: explain the purpose of the policy, such as improving work-life balance and employee engagement.
- State the policy duration: specify the duration of the policy, including any transition period for employees who have accrued PTO but have not yet taken it.
How to ensure fair use
So, how can you make sure that people aren’t abusing your unlimited PTO policy?
While we’d all like to think that this wouldn’t be the case, you need to plan pre-emptively in case the situation does arise. Having the correct leave management software in place is a big part of that. While it’s unlimited in nature, the traditional process of requesting leave and having it approved by an appropriate manager should still be in practice.
By ensuring that the chain of approval remains in place, managers gain insight into who is taking their leave—and how often. Good software, like Cintra People, will make sure you can track absence alongside performance, not only giving you oversight over who is off on your team, but also how this is impacting target progression.
Ultimately, to maintain their position in the company, employees still need to perform their job duties and meet their performance goals. And having the right software in place, which clearly defines and makes policies accessible, is key to making this achievable alongside unlimited PTO.
Is unlimited PTO right for your company?
Unlimited PTO isn’t a one-size-fits-all policy—it can work well in certain environments, encouraging people to take the time they need to thrive, while in others, it can have the opposite effect. Before implementing the policy, you should consider your company’s culture, operational needs, and management style.
| Question | If yes... | If no... |
|---|---|---|
| Do you measure employees on results, rather than hours? | You’re well-positioned for unlimited PTO; with a high trust culture that works well with the policy. | You should consider building more trust and shifting focus to output before implementing. |
| Can your operations handle occasional, unpredictable absences without major disruption? | Your business can likely absorb the flexibility of unlimited PTO. | You may need stricter leave planning to maintain coverage. |
| Are managers skilled at setting clear expectations and ensuring fair use? | Strong management will help the policy run smoothly and avoid misuse. | Unlimited PTO could lead to inconsistency or resentment without proper training. |
| Is most of your work project-based, remote-friendly, or easily rescheduled? | Flexible workflows make unlimited PTO easier to accommodate. | Fixed-schedule or high-coverage roles may struggle with unpredictable leave. |
| Do you already encourage employees to take their full annual leave? | Your culture supports rest, making underuse of unlimited PTO less likely. | Without encouragement, employees may take less time off and risk burnout. |
| Is legislation at the forefront of your current HR software? | You can maintain compliance and avoid disputes over unused leave. | Unlimited PTO could create legal and payroll complications. |
If you can support this level of flexibility, with the ability to manage variable absences and still reach targets, can unlimited PTO be a valuable tool for you.
And with positives like boosted morale, talent attraction and retention, as well as improved productivity, it’s definitely something to consider if it feels like the right move for your team.
Say ‘Yes’ to unlimited PTO with Cintra People
One thing is for certain when it comes to unlimited PTO: you need the right absence management software in place to handle it correctly. And with Cintra People, you have everything you need to implement the policy with confidence. Whether it’s seeing who is on leave or spotting trends in frequent absences, we have everything you need to manage leave with confidence. No admin. No delays. Just simple, visible absence management. As easy as that!
Sound good? Book a demo today to see how we can help streamline your processes!
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