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OOO Forever: Is Unlimited Leave Legit?

We run into a number of SMBs who are either using Unlimited PTO or intrigued enough to consider putting a policy into place.  Some companies execute these policies better than others. The spectrum usually ranges from a “loosey goosey scenario” where employees can come and go as they please; all the way up to structured policies that define every parameter of the Unlimited PTO policy.

Based on this very unscientific Yahoo Poll, 75% of U.S. internet users think unlimited PTO is a “good idea”.  This makes sense since the U.S. has some of the most vacation-deprived workers on the planet.  The chatter surrounding unlimited leave has also been increasing recently. Companies like Virgin and Netflix publicly tout the benefits of making unlimited PTO available to their employees.  If I were a pilot for Virgin I’d probably take my unlimited leave right when I reached someplace like Bali or Bora Bora, but I digress.

We decided to take a look at some of the pros and cons of having an unlimited PTO policy:

Pros to unlimited PTO

  • You’re sending the message that you trust your employees;
  • You convey that you’re not like other companies (e.g. you’re not stodgy and you don’t play by the “corporate” rules);
  • Your employees don’t have to track their leave, ask for permission, request time off, or fill out any HR forms;
  • Your HR person doesn’t have to play “bad cop” when employees are taking too much leave;
  • You don’t have to pay the extra $2500 for your HRIS system’s Employee Leave Tracking Module;
  • Your company doesn’t have to book leave accruals, make leave payouts, or pay out accrued leave balances;
  • Your employees don’t have to lie to you and pull a Ferris Bueller when they stay home sick.

Cons to unlimited PTO

  • Companies may believe that having an unlimited PTO policy will magically solve all of their HR issues. Especially those related to absenteeism, tardiness, over/under working employees, and work/life balance;
  • The legal ramifications of having an unlimited leave policy is still a relatively grey area. The notion of unlimited leave has yet to become mainstream (think required payouts in California, the interplay with state and local paid leave laws, discrimination claims, etc.);
  • By not tracking leave you won’t have a clear picture of who is or is not taking leave, when employees are taking leave, or why they are taking leave.;
  • If you ever want to change your unlimited PTO policy, expect this:
Our recommendations

We would like to offer a few recommendations if your company decides to implement an unlimited leave policy or if you already have one in place:

1) Make sure that your unlimited PTO policy is written down somewhere;

2) Make sure that your unlimited PTO policy is communicated to your employees;

3) Make sure that your policy contains processes and procedures in it relating to calendaring, tracking, requesting, and timing – and maybe even some guidelines; and

4) Make sure that you understand how your unlimited leave integrates with statutory leave such as state/local paid sick leave, FMLA, Medical Leave, Disability Leave, USERRA, and other types of required leave.

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