It truly dumbfounds us when we hear people wanting “unlimited” paid time off (PTO).
While it might sound enticing to employees while applying for jobs, the reality is “unlimited” PTO is just an egregious lie that employers tell their workforce.
In many cases, the most important thing that gets lost in the conversation is what employees are forced to give up when their organization decides to switch to an “unlimited” system.
HR Dive recently cross-examined the pros and cons of unlimited PTO systems and we want to highlight a few of the key points:
Employers Wiggle Free from the Financial Burden
“It’s great to not have to pay out [accrued vacation] when people leave,” Maggie Grover, a partner at Wendel, Rosen, Black & Dean LLP told HR Dive. Because people are so connected and working even when they’re technically off, they tend to take fewer full vacation days. So even if you cap a vacation bank at 1.5 or 2 times the annual accrual amount, the payout at the end of the employment relationship can still be significant. (Not every state, she noted, requires employers to pay out accrued vacation.)”
Recognizing that this can become a large financial obligation, many companies are relieving themselves from these obligations by offering unlimited policies.
Employees can’t save or accrue “unlimited” vacation time to use next year. When it comes time to transition from the company, the employer has no obligation to pay out the extra hours of productivity that were used in lieu of taking a break.
To help reinforce that point, in the RiseSmart blog 5 Pros and Cons of Unlimited PTO for Employers and Employees, it is listed as a “pro” under the category of “Companies Enjoy the Savings.”
The posts states, “with an unlimited PTO policy there is no accrual of time off. So, if an employee leaves or quits the company, the employer has no obligation to pay them. This significantly reduces the costs of having to pay employees for unused PTO and may be one of the most compelling factors for companies considering an unlimited PTO policy.“
SERIOUSLY…!? They aren’t afraid to hide it? Talk about slimy and taking advantage of your employees.
Unlimited vacation is a work around—that’s all it is. By offering this perk, companies will now get away from tracking and accruing a liability that in some states, once it is accrued, is considered earned wages. Once wages are considered earned, they must be paid out at departure or termination.
At PTO Exchange, we recognize that companies and HR departments gloss over the fact that employees lose accrued vacation time when they switch to unlimited PTO policies.
Employees May Take Less Time Off
Many studies show that the workforce often ends up taking little or no more time off in an “unlimited” system compared to when they had a set number of days off.
In a study done by Namely, research suggests that employees with “unlimited” vacation actually take FEWER days off (13) on average than those with a limited number (15).
Seems kind of backward since it's “unlimited” PTO.
It’s time to Ditch Unlimited
Unlimited PTO sounds cool on a job description, but companies are using the data to benefit their bottom lines. Employees end up getting paid less while the company gets more of their productivity.
If you have unlimited, you don’t have PTO—you have restraints. The psychological buzzword is harming the workforce and leading mass groups into forfeiting the number two sought after benefit among the work community.
PTO Exchange offers a patented platform that gives companies an inclusive and flexible service that allows employees the ability to self-direct their accrued paid leave for whatever means the most to them and reduces their stress—ranging from student loan repayment, education support, healthcare or retirement savings, to travel and charity.