Is unlimited time off for employees all it’s cracked up to be?

Unlimited time off for employees has become the latest in a string of flexible working options to emerge in the wake of the pandemic. But is it actually worth it?

We live in a new age of flexible working. Since the pandemic it has become common to see benefits such as a four-day work week and remote working to be offered by companies – plus one other novel benefit – unlimited or ‘discretionary’ time off (UTO).

One of the most high-profile firms to implement the policy, Microsoft recently announced that all US employees would have unlimited paid time off. Kathleen Hogan, chief people officer at Microsoft commented at the time: “How, when, and where we do our jobs has dramatically changed.”

What is unlimited paid time off?

Unlimited paid time off is a structure where employees are not given a fixed number of paid leave days in the year.

Employees can take time off as per their discretion, generally as long as they do not disrupt business activity.

There are benefits and drawbacks to consider whether unlimited PTO is for you, and whether you should consider it if your company offers it.

Benefits

Work-life balance: Unlimited PTO offers more flexibility to employees to balance their work and personal lives. Employees can take as much time as they need to prevent burnout and improve mental health, without worrying about losing holiday entitlement.

This should ultimately lead to increased productivity, benefitting the employees and the employer.

Employees view limited PTO as a use-it-or-lose-it plan. Unlimited time off could mean that employees self-check regularly and take time off more effectively.

Less micromanagement: With UTO, employees could be given more responsibility for managing their own time. Employees could then feel a higher sense of autonomy and therefore satisfaction with their job.

At the same time, companies will have less administrative processes to account for every employee’s time off and reduce quarrels over a day’s leave every so often.

This means employers can reduce the need for heavy admin and decrease the micromanagement of employees and their activities.

Talent recruitment: UTO is a powerful recruitment tool for employers if used correctly. Having UTO could be seen as a considerable perk for a new employee, especially if implemented well.

A company’s holiday policy is the second-most rated benefit (after healthcare) when ranked by employees on US job comparison sites.

Thanks to the pandemic, many workers increasingly look for flexibility when considering a new job, and UTO could be an effective added benefit to attract workers as a result. It also shows that the company is more forward-thinking than others and is likely to be a more progressive place to work.

Drawbacks

Lack of structure: While employers are freed of administrative processes, there is chance it could create a lack of structure in the organisation. UTO can leave employees and their managers struggling to balance workloads and ensure work isn’t going undone when they’re off.

Overlapping holidays in some times of the year such as summer or Christmas can also leave insufficient staff in place and an excessive burden on those who are working in that time.

Some balancing of the practice and restrictions on how many employees can be off simultaneously might be required, limiting the effect of UTO.

Loss of quitting benefits: UTO helps save cash for employers, to the detriment of employees leaving the company.

Under UTO, employees can’t claim their earned unused leaves’ compensation while quitting or being made redundant, because effectively they don’t have any, unless a minimum entitlement is laid out in their contract specifically.

This is good for employers though as they save money when severing ties with a worker.

Denial: While UTO is theoretically unlimited, managers could have the discretion to deny leave if they feel it is excessive or comes at a bad time for the team.

This means on top of losing your right to certain paid benefits when you’re working a notice period, UTO isn’t necessarily actually ‘unlimited.’

Underuse: Setting a defined leave entitlement can be a good way to give an employee a target for time to take off. Without one, a diligent employee might not take enough time off and might burn out despite the UTO policy in place.

This leaves them undercompensated and overworked ultimately, so managers should ensure their staff are taking time out.

Potential abuse: Overuse of UTO by existing employees is certainly a problem employers could face, although in theory there is no such thing as ‘overuse’ if staff have no limitations.

A company should try to manage the policy carefully and discourage anything that could be considered ‘abuse’ of the freedom. Good leadership at all levels coupled with a positive company culture will have employees taking reasonable time off and maintaining high productivity.

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