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The Pros and Cons of “Unlimited Paid Time Off”

As an employer do you worry about all of the paid time, e.g. vacation, sick, personal days, etc. that your employees have available to them?  Think about this; what if you didn’t have to worry about how much time employees had available to take off and the only thing you had to do as a manager was to wait for the employee to request the time off. No more tracking or administrative tasks to worry about.  Just wait, it gets better.  For employees not only are they able to choose when they want to take time off, but they are also able to choose how long they want to take off, as well. Taking time off when they want for how long they want are traits of a new concept called discretionary time-off, or “unlimited” time off.

Many traditional employers think that this is a crazy idea and that employees will take time off left and right and that productivity will decrease within the business. While this may be true, this model assumes that the company is treating its employees as responsible adults, which in turn shows that the company trusts the employees and their judgment as to when they may need a time off to unwind and recharge away from the workplace. Believe it or not, there are organizations that we all may know that are using this model successfully, Netflix, and Best Buy.

There are certainly pros and cons to this model.

The pros start with the fact that the model employs the idea that employees shouldn’t be taking any time off, if they have a heavy workload to finish and are not completely caught up with their day-to-day work. The model allows employees to manage their time, so that they may take the time off when they want, as long as their workload is manageable.  According to an article from the Society for Human Resource Management (SHRM), titled “Unlimited Paid Time Off: A Good or Bad Idea?”,  “The change can potentially lead to a more engaged workforce because management is trusting employees to manage their own time in a way that serves their personal needs while still getting the work done”.

The model may also be a huge benefit in terms of the way that applicants view the company as opposed to a company that does not employ discretionary time off.  Applicants may see themselves as someone who is able to hold themselves accountable for their work, while still being able to take the time off as needed to recharge. A survey of 2,094 adults done by Ask.com in 2012 showed that almost 70 percent of the surveyed adults would be more inclined to work for a company with discretionary time off.

On the other side of the picture, the company may also see some financial benefits from the use of discretionary time off. Very few employees ever use their total amount of allotted time off.  While some do, others do not.  Some organizations allow their employees to roll over unused paid time off from year-to-year. On the balance sheet of an organization this may illustrate a large accrued cost for the company.  If there is a discretionary time off model in place, there may be no accrued costs on the balance sheet?

The last significant pro to this model is that discretionary time off may lead to increased productivity within the administrative sector of the company because they will no longer have to track the amount of time that an employee has taken off throughout the year. According to Ask.com, who calculated the amount of time an organization would save administratively by moving to an unlimited paid time off model, an organization could save roughly 52 hours a year in administrative time.

While this seems like a complete win for the employee and the employer, is it really as easy as it sounds? ­­­One might think that this is an easy model to implement and that it is exactly what it sounds like; just take as much vacation as you want, and management won’t bat an eyelash. Not the case, unfortunately. According to Bruce Elliott, Manager of Compensation and Benefits at the Society for Human Resource Management (SHRM) who is mentioned in an article from Business Insider titled “The Pros and Cons of Unlimited Vacation Policies”, “It can be hard to implement fairly”. “The biggest stumbling point with unlimited vacation, Elliot says, is ensuring that all employees are given equal opportunity to take their time off. That comes down to management. The obvious problem is that everyone can’t be out at the same time. Companies with these policies, then, need strong managers who can juggle a vacation schedule that is fair to all and effective for the business.”

Another disadvantage to this model may be that companies may offer discretionary time off, because they think that if employees are given the option to take time off whenever they want, that they will not take any time off, period. There is only so much time within a year to take time off, that there is really no “good time” to do so causing employees to not take time off at all.

So, discretionary time off allows employers to let their employees take as much time off, within reason, whenever they desire. It allows employees to take time off as they need it, whether it be for a family emergency, or just to step away from the desk and recharge. While managers will no longer have to administer the tracking of an employee’s time off, it does require managers to regulate when employees take time off so that not everyone is taking time off at the same time. In addition, the organization may see some benefits by not having to accrue paid time off on the balance sheet.

Deciding whether your organization should implement this model ultimately is a cultural shift for many organizations.  Managers need to ask themselves whether the employees within that organization are ready to be given this much freedom.  However, most are finding that implementing this model definitely means greater productivity and less administration.

For additional information on this topic, please contact New Focus HR, LLC at www.newfocushr.com.

Written by:  Kristen Deutsch, M.B.A., CCP






New Focus HR is a human resources consulting and training company that services all organizations. Our expert team collaborates with businesses to attract, motivate, retrain and retain their biggest assets, employees. While engaged with an organization, our focus is to find solutions that improve the company’s internal HR-related practices while increasing results at the same time! Our focus. Your results.