Avoid the Hype: Unlimited Paid Time Off

One of the benefits that has received growing attention in the last year is unlimited vacation time. It is positioned as the “ultimate” in paid time away from work, and many of the people who have read the news articles about the plans have wondered what it would be like to implement such a plan. I’m here to tell you: avoid the hype. It’s not all it has been touted to be, and like with all decisions, there are unintended consequences to consider.

The Prevalence of Unlimited PTO Plans

The 2015 SHRM Benefits Study, an annual report examining the nitty gritty details of benefit plans, pointed out that between >1% and 2% of employers are offering unlimited paid leave plans. So while we get bombarded by the media talking about these revolutionary companies, in reality less than two out of a hundred organizations are even in the discussion.

What that means for me as a researcher is that there is too small of a sample size to accurately judge the efficacy of these kinds of plans. Who knows if they really work to help employees manage their lives better? We simply need more data on adoption to make that call.

What Companies Know About Offering Unlimited Vacation Time

Often the first thought, especially for HR folks, is something like, “I know who would take advantage of that. Their PTO balance is already in the red…” But the companies putting these systems in place aren’t worried about that. Often times they have generous leave policies already.

But people aren’t taking advantage of the existing benefits.

I wrote last year about a nonprofit organization that was created to help people take more vacation time, because they aren’t even using everything that is available.

In case you weren’t aware, March 31st 2015 is being cast as Vacation Commitment Day, brought to you by the Take Back Your Time nonprofit. The organization is devoted to helping workers across America focus on taking more of the vacation that they have available, because we are notorious for accruing, but not using, our leave.

This sounds like a great idea, but the timing is interesting.

This is an intriguing coincidence because just last week I was reading a new study from Accountemps about the top benefits employees are asking for in 2015. Want to know what topped the list?

More vacation time.

So what gives? We want more vacation time, but we also don’t use all of the time that we accrue.

As if that wasn’t enough, the federal government is now attempting to introduce legislation that will force small companies to offer paid leave to employees.

The Big Picture

With all of these pieces in play, it’s an interesting time to be working in the benefits side of the human resources profession. I would use this reminder as an opportunity to review your company’s offerings in terms of paid leave. More importantly, look into the usage of the benefits.

The first thing we do when benchmarking benefit offerings is to consider what we’re doing relative to the market. However, smart HR leaders also look at the benefits adoption and usage to determine how employees are utilizing the offerings. For instance, if you offer a health reimbursement arrangement but only two employees sign up, it probably wasn’t worth the effort to establish and market the program.

That also applies to vacation time. The reality is while many workers accrue paid time off, there may be circumstances that prevent them from using the leave. For instance, they may have work projects that necessitate their presence or there might even be a cultural norm of foregoing vacation days to demonstrate “dedication” in some organizations.

Analyze the accruals against the usage of the benefit. If you have a substantial amount of accrued time, consider what implications that has for your organization and why your people might be saving that time. Also keep in mind that this could be seasonal: employees may save up time for summer trips or winter breaks. It’s important to dig into the “why” behind the numbers, because it could signify underlying issues or opportunities.

Source: Do we really need more vacation time?

Do People Really Need More Vacation Time?

The Other Problem with “Unlimited” Leave

There’s a famous study on choice that helps to illustrate this point. People were given options from a large set of choices, and few made purchases (analysis paralysis). Other people were given options from a small set of choices, and more of them made purchases because it was easier to evaluate the few choices against one another.

It all began with jam. In 2000, psychologists Sheena Iyengar and Mark Lepper published a remarkable study. On one day, shoppers at an upscale food market saw a display table with 24 varieties of gourmet jam. Those who sampled the spreads received a coupon for $1 off any jam. On another day, shoppers saw a similar table, except that only six varieties of the jam were on display. The large display attracted more interest than the small one. But when the time came to purchase, people who saw the large display were one-tenth as likely to buy as people who saw the small display. (Source)

What this means for leave is that without some sort of reference, people will often use less of a good. Here’s an example: if I handed you a plate of cookies and told you to take what you wanted, you might take one, two, or three (hey, I’m hungry and like cookies). But if I handed it to you and said, “Take a cookie,” then you would probably get just one. Hopefully you’re starting to see what this means for paid leave.

The Typical Work Environment of Unlimited PTO Adopters

There’s one other thing that people often forget as well about these high-profile companies. If you’re working somewhere like Netflix or LinkedIn, two of the organizations offering this paid leave benefit, you are working many hours. Many, many hours. And the work itself doesn’t lend itself to a three-month vacation at the employee’s whim.

Which is why offering unlimited paid time is a great idea for the employer, and not the other way around..

What competitive, driven, career-minded employee is going to take advantage of this? Do you mean to tell me that the guy who just became a father is going to tell the rest of the team working on that big project that he’s going to take the next 11 months off to “stay at home and spend time with my baby.” Really? Sure, he now has that option. But who’s going to pull that trigger? And who’s going to risk suddenly disappearing from the office for months on end, travelling to Australia or kicking back with a cold one on the beach while the rest of his co-workers are working away on deadline? And what happens a year later when evaluation time comes? Who gets that promotion, that salary increase, that corner office–the guy who’s been working day and night on that product launch or the other guy who’s been taking full advantage of the company’s “paid time off” policy and working on his golf swing. (Source)

So, I encourage you to avoid the hype. Unlimited paid time off is a publicity stunt for these larger organizations, and they have cultures that can force/coerce people to work even though the carrot of unlimited PTO is hanging right out there in front of them. What you should do instead is make sure your work environment is supportive of people that take any vacation that you do offer. Too often I’ve heard snide remarks and rude comments about an employee using vacation time, a benefit the company freely makes available to all employees! That is the battle we should be fighting, not one to request this latest fad in employee leave benefits.

 

4 thoughts on “Avoid the Hype: Unlimited Paid Time Off

  1. Good Morning Ben,
    Out of the 6 organizations I have been with over 20 years, I have never found any of them to be respectful of PTO policies. They each say that they support time off for employees, but they all react negatively to using it. Even when PTO has been scheduled 6-8 months in advance, back-ups trained, projects completed, and notifications given, supervisors, managers, and most HR members seem shocked and dismayed that an employee is making use of their PTO. I understand that this is anecdotal, but having worked for small business, large business, and non-profits, this is what I have seen at every single one of them. I look forward to a day when more HR representatives are as forward-thinking and as progressive as you are.
    Sincerely,
    Anonymous

  2. My first thought (every time I read anything about unlimited paid time off) is “I know who would abuse that.” I usually think about that in the context of “the first person to put it on the calendar is usually approved” and not so much anything else. Right now as 1 of 2 recruiters for the place I work, we would kill each other over unlimited paid time off-we can’t keep up with the work we have now let alone if one of us takes more than a day or two off. We are an example of where the company would benefit from it- we would be at work every day anyway.
    I also think about the paid time off caps we have at work. You can currently roll over three times your accrual rate, so for some very long term employees they can roll over 18 weeks of paid time off. Guess how many of them use 18 weeks? Every one of them will tell you it’s hard to use the 6 weeks a year that they earn. Having unlimited paid time off would get rid of the need to roll over accrued time.
    I think it would cause arguments in the workforce or employees to resent employees who they deem “abuse” it (by their own standards if there are not standards set by the company).
    All of this to say, I agree with you- it’s hype and organizations need to do what fits their needs!!!

  3. I can say, from a company that has implemented unlimited PTO successfully, there are some upsides. Our employees have reported feeling positively that the leaders in the company trust them to provide this benefit. Our managers have reported no differences from when we had accruals (they still need to make thought-out decisions about which requests to approve and which cannot be approved, based on business needs). We have trained our managers to be proactive and run monthly reports on the vacation time that has been used (even though it is unlimited, we still track it) and employees who have not taken time off, to encourage them to do so, with the expectation that employees should be taking no less than 2 weeks per year, preferably 3 – 4. So, for us, it was not a publicity stunt, it resulted from us taking a look at how much we went paying out to terminating employees (paying out their vacation accruals) and we decided to invest that money in a better resource – the employees who are staying with us. I am pleased to report a positive result. Feel free to reach out to me if you have any questions. I enjoy your column, Ben, keep up the good work! :)

  4. Pingback: Salary Negotiation: It’s Not a Zero Sum Game | upstartHR

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