Considering Unlimited PTO? Communication is Key

Unlimited PTO is one of the latest HR innovations to improve recruitment and retention while potentially increasing productivity. It can also save substantial amounts of money by eliminating accrued vacation payouts. Competitive companies like Netflix and LinkedIn are all over the idea, and it seems to be working for them. The Miller Group recently implemented it, too.

How it Works at The Miller Group

We updated our parental leave policies recently, and that inspired us to look at PTO, as well. We realized our sales team had a pretty flexible PTO policy, but our other exempt staff didn’t have the same advantage. We trust our people and wanted to do all we can to help them with work-life balance. We also wanted to encourage associates to stay home when they’re sick, without the fear of losing precious “vacation” time.

We didn’t have to reinvent the wheel.  Other companies have done this, so we researched how best to proceed. We then designed a clear policy supported by a lot of communication.

Critical Components of Our PTO Policy

• Take responsibility for getting your work done
• Talk with your manager before and after your time away
• Work with your team members to cover one another
• Put a notice on your calendar whenever you’ll be out four hours or more

After about six months, unlimited PTO is working great. We haven’t seen any meaningful change in the amount of time off taken, so it’s neither keeping people from taking vacation nor encouraging them to take extra time off. We were delighted recently when a staff member was able to take a full month off for her European wedding and honeymoon without worrying about using up all her sick days or ending the year with no available time off. We check in with managers quarterly and have heard positive reports from them, as well as individual associates. We haven’t encountered any problems with associates thinking they have to work while taking time off, either.

The Pros of Unlimited PTO

One obvious motivation for offering unlimited PTO is to save money. With an unlimited policy, employees don’t accrue vacation hours, so there’s no accrued time to pay out when they leave. This can mean significant savings for companies with high turnover.

Organizations also are adding this benefit to improve recruiting and retention – especially at this time, when competition for the best workers is so tight. The jury is still out on whether unlimited PTO makes a measurable difference in recruiting success. Some surveys say the effect is minimal. In one survey, people said they would take 10% less pay – all else being equal – if unlimited PTO were offered.

At The Miller Group, we also believe unlimited PTO is the right thing to do. We trust our people, and they deserve to be in control of their time as much as possible. Giving them tools to manage their work/life balance increases their commitment and helps them bring their best effort to the work. So our clients see the benefit too .

Potential Cons of Unlimited PTO

• During our research phase, we learned that some companies had to reverse the policy because managers weren’t supporting it or using it themselves. Understanding that leading by example was critical, we held an all-manager meeting to explain the policy, answer questions and reinforce the importance of all departments using it consistently.
• It’s possible that unlimited PTO will cause some employees to avoid taking time off, causing burnout. And some research does bear that out. It’s our theory that those are the same employees who aren’t taking enough time off today!
• By contrast, employees could misuse the policy and take too much time off. That’s where teamwork and communication are key.
• Making unlimited PTO work for hourly associates is nearly impossible, because of laws around overtime. To compensate, we offer hourly associates other flexibility opportunities, such as summer hours and the option to take shorter periods of time off when needed.

Lessons Learned

Plan ahead: It pays to start working on this benefit well before you plan to roll it out. We thought we were ready and then encountered several scenarios that we hadn’t covered. And even though we started a year early, we’re still fine tuning and editing our policy.

Allow ramp-up time: Giving employees time to plan for the change is important, too. We announced the change in August for implementation in January.

Coordinate with other policies: We had to plan for scenarios when PTO intersects with FMLA, parental leave, military policies and other time off policies. For example, we use the previous PTO allowance to determine how long a person needs to be out sick before full pay ends and STD kicks in.

Put some brakes in place: While the idea here is to give employees control over their working hours and keep them accountable for results, you may occasionally have someone abuse the benefit. Our policy includes an executive team review of any request for more than a month off. And we work with managers to help ensure one team member isn’t taking an inordinate amount of time off to the detriment of other team members.

We’re certainly taking some time to get used to this level of flexibility, but we’re satisfied with the results so far. Communication is so important – between you and your management team and among managers and their teams.