If your company operates in a predominately work-from-home model, asking employees to return to the office may elicit pushback from workers who’ve grown accustomed to the flexibility of remote work.
Working from home offers many perks, such as improved work-life balance and the mental health benefits of disengaging from hustle culture. However, many corporations, including Disney and Starbucks, are mandating a return to the office. CEOs cite how company culture and creativity have suffered from the lack of camaraderie and the connection of physically being together.
If it’s time to require in-office attendance at your company, and you’re asking employees to let go of widely embraced new norms such as video meetings, team chats, and not wearing pants, offering Unlimited PTO could be an incentive worth considering.
Microsoft recently announced it is abandoning the traditional paid vacation system and adjusting its benefits package to include Unlimited PTO for U.S. salaried employees. And Microsoft isn’t alone. According to The Verge, “Salesforce, Microsoft-owned LinkedIn, Oracle, and Netflix” are also pivoting to a more flexible Discretionary Time Off (DTO) model.
This trend has many companies wondering if they should offer a similar benefit to entice a return to in-office life. To help you decide if DTO is suitable for your company, let’s compare the advantages and pitfalls of Unlimited PTO and how to solve them.
Advantages of Unlimited PTO
Vacation Days Are Good for Productivity – PR Newswire found that employees “who received a high mark during performance reviews took an average of 19 vacation days each year, versus 14 days on average for low performers.” This five-day gap implies that time away from the office gives workers time to recharge and do the high-level thinking that directly impacts performance for the better. Vacation days also improve productivity via the retention of high performers and team loyalty. Put simply, it builds goodwill and trust.
An Unlimited PTO plan could be an enticing benefit if you’re looking for ways to retain your star employees and prevent job-hopping.
Vacation Days Prevent Burnout – Employee burnout happens, especially in a post-pandemic work-from-home paradigm that requires juggling childcare schedules and family responsibilities and hiding in closets for a quiet place to take that important phone call. If your team is seeking ways to re-engage a burned-out employee, unlimited paid time away from the screen to sharpen one’s axe can be good for mental health.
Unlimited PTO Saves Money – Perhaps Unlimited PTO’s most significant and confusing benefit. At first glance, Unlimited PTO might seem expensive for the company. But it can actually save your organization money. Many states require unused PTO to be paid out to employees when they leave the company, which can amount to millions of dollars. With a discretionary time off (DTO) plan, there is no accrued time, which means there is no unused PTO to pay out – that liability is reduced to zero.
Disadvantages of Unlimited PTO and How to Solve Them
PTO Can Be Underutilized – The PR Newswire report cited above also found that “unlimited vacation is under-utilized. Employees with unlimited policies take 13 days a year versus 15 for those with traditional PTO plans.” If vacation days are connected with performance, then employees leaving PTO on the table may also be leaving the results – i.e., boosted productivity – unrealized.
To ensure employees use Unlimited PTO, it’s recommended that companies require employees to take a minimum of fifteen days of paid vacation annually. This can encourage workers to feel comfortable dipping into their Unlimited PTO, as opposed to feeling guilty or undeserving. Leadership should set the tone by taking vacation days themselves. If managers take time off, employees will feel that taking days off is an accepted practice.
Not Taking Time Off Can Become a Competition – When Unlimited PTO benefits are optional, competition can develop between employees – the fewer days I take off, the harder I work, and the more dedicated/valuable I am. When, in fact, as we’ve shown, taking days off increases productivity and prevents burnout. By requiring a minimum number of vacation days to be taken, you eliminate the competition that not taking days off can foster.
Time off Needs to Be Approved by a Manager – When manager approval is needed for every Unlimited PTO request, employees may worry they’re seen as abusing the system or not working as hard as their colleagues by enjoying this benefit. A manager-approved plan may also fall victim to favoritism, racism, and sexism.
To counter this, create a culture where vacation days and sick days are there to be used. If employees aren’t feeling well, encourage them to take a sick day. That’s what they’re there for. Or treat yourself to a three-day weekend by taking PTO day on a Friday or Monday.
Another way to avoid this potential drawback of Unlimited PTO is to automate the process with an HR Performance Software program. Adopting an online scheduling portal for your business allows employees to make requests electronically and creates a filter for requests to pass through, so leadership is not asked directly.
There are many advantages to offering Unlimited PTO when looking for ways to bring employees back to the office in the aftermath of the COVID-19 pandemic. This benefit can increase productivity and decrease burnout while saving your business money. To set your team up for success, be sure you’re prepared to counter the problems of Unlimited PTO by creating a culture where time off is encouraged and requests can be made electronically.
In addition to offering Unlimited PTO, employers should consider these ways to support working parents and consider why offering a student loan repayment program encourage a return to a work-from-work model.
Let your IMA Benefits team know if you have any questions. We review affordability every year with our applicable large employer (ALE) clients and are happy to assist as you strategize for your plan year beginning in 2022.
IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.
This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.