New Reasons to Consider Unlimited PTO Now

The following article was originally posted on the Mercer US Health News blog. You can find this article along with more health news content here.

By Richard Cooper, Life, Absence and Disability Consulting and Maura Cawley, Sub-market Segment Leader

For many employees today, paid time off is a key factor in deciding to join an organization and to stay at a job. In our recent Global Talent Trends survey, employees around the world ranked vacation and time-off fifth as a reason to stay, while employees in the US ranked it third. Beyond its importance in attraction and retention, employers also recognize that allowing employees flexibility in taking time away from work is an important component of total well-being.

As employers consider ways to enhance their vacation and time-off policies, a growing number have decided on unlimited PTO. Mercer’s Survey on Absence and Disability Management found that 20% of the 405 responding organizations offered unlimited PTO to at least some employees in 2021, up significantly from 14% of respondents in both 2015 and 2018. While 8% offer this benefit to executives only, employers are just as likely to offer it to all exempt employees (8%), and an additional 4% offer it to all employees.

Not so long ago, employers viewed unlimited PTO as a perk at the far end of the spectrum. But in today’s work environment unlimited PTO offers some practical advantages. Remote work and the 24/7 nature of technology have blurred the distinction between work and not working. Employees want – and increasingly, expect – more flexibility and time off than ever before. And, in a tight labor market, employers are increasingly called upon to negotiate “one-off” vacation deals to attract talent to the organization.

For some employers, unlimited PTO may help address these challenges. Of course, one advantage it has always offered is better management of vacation-related liability accruals. We have seen companies that have put unlimited PTO in place using the savings to enhance other components of their total rewards package.

Lessons learned

Another reason to consider unlimited PTO now is simply because these programs have more of a track record. Here are some best practices to keep in mind as you consider whether unlimited PTO might be a fit for your organization:

• Engage business operation stakeholders up front in the process. Unlike many other benefit policies, unlimited PTO needs to fit with how work gets done in your organization. It will be critical to discuss early on how it could work – or not work – for different employee populations.
• Anticipate employee reaction. Even though most employees view unlimited PTO favorably, some may not, particularly long-service employees who have worked years to earn the highest level of PTO. Be prepared to tackle this up front. An important aspect of this is the handling of current accrual balances. While the majority of employers in our survey have opted to have accrual balances forfeited where allowed by state wage laws (58%), others have paid out existing balances (44%). Considering various accrual transition approaches – including financial and employee relations implications – is an important part of your design strategy.
• Develop policy guidelines to support appropriate use of the program and be clear about what the policy is and what isn’t included. Provide guidance on the basics, such as requesting time off, and include examples to illustrate how the program connects with other policies (e.g., long-term illness absences, paid parental leave, etc.).
• Provide manager training and coaching to address concerns that unlimited PTO will be more difficult to administer than a traditional vacation plan. Training should include real-world scenarios to get managers comfortable with application of the policy.
• Communications are critical – not just for the initial program rollout but also on an ongoing basis. What key messages do you want employees to take away from implementation of this new approach? For example, some employers might choose to emphasize the well-being benefits; others might focus on greater equity; while still others might choose to frame unlimited PTO as a way of adapting vacation policies to hybrid working.

While unlimited PTO may not be the right approach for every organization, there are good reasons that it is gaining traction now. Given the high value that employees place on more flexible time off, it may deserve a closer look.