How to Implement and Manage Unlimited PTO Policies on a Global Scale
In today’s competitive world of recruiting, a growing trend is the unlimited PTO policy. Gaining the approval of millennials and employers alike, the policy grants an employee responsibility to manage how they will take time off while getting all their work done for a month, quarter, or a year.
Unlimited paid time off sounds great, but the trending policy sees mixed results within different organizations. Also, there are numerous ways to implement a policy and even more considerations when you are trying to implement a global policy within your international organization.
Currently, WorldAtWork estimates only 1% of larger companies in the U.S. offer unlimited PTO. The Society for Human Resources estimates the number rises to 6% for companies worldwide.
Here are some considerations you may want to make before you decide to move toward unlimited PTO.
Is Unlimited PTO Right For Your Company?
There is a good case to be made for implementing a policy of unlimited time off. But there are also reasons to avoid the policy under certain circumstances. Here is a list of pros and cons to help you decide if the policy is right for you.
Offering unlimited PTO is an extremely attractive benefit for job applicants, particularly younger millennial workers, who are known to sometimes prioritize a strong work-life balance. For example, 87% of workers age 25-34 now expect to have some input regarding when and where they work. A survey from Technology Advice also shows 56% of employees say perks are very or moderately important when deciding whether or not to accept a job.’
Valued employees, who feel their managers treat them with respect are 63% more satisfied with their jobs. Being given the flexibility to get work done and take time off when needed, shows employees not only that their company cares, but also that they are trusted.
No More Costs for Accrued Time Off
U.S. Travel reports businesses owe the average employee $1,898 in accrued time off. When an employee departs, if you have an unlimited PTO policy, your company won’t owe them a dollar for any unused hours.
Eliminating Problems with Unused PTO
It’s estimated more than 40 percent of U.S. employees have PTO time they are unable to use each year. Studies show being unable to use PTO leads to a decrease in morale across an organization and in some cases, decreased productivity.
Unlimited PTO lowers stress. Plain and simple, people are human, and regardless of where you work at certain times of your life you may need more PTO or more flexibility than others. For instance, say you have a sick loved one or parent to care for out of town. Also, in today’s world, working parents are increasingly juggling time needed to take care of a sick child or a healthy child if daycare is cancelled, which often cuts into time that is also needed for a once-a-year, actual vacation. Additionally, if someone has limited PTO, they sometimes save their time up for the end of the year, but then still fail to take it all. By allowing for unlimited PTO, employers are placing the ball in an employees’ court to handle business remotely when needed and be away from the office for personal emergencies, without having to worry about how much PTO time is left and whether or not they will see deductions to their paychecks.
In contrast, unlimited PTO can increase productivity by helping to avoid employee burnout. It may also lower the number of unexpected absences. A study by the Alexander Hamilton Institute recently found a drop of up to 10 percent in sick days, after organizations implemented unlimited PTO.
Ultimately, your HR department often wins when using unlimited PTO. By not having to do the administrative work of sorting through sick, personal, and vacation time, you are freeing up time for your team to make a larger impact, in other areas, throughout the organization.
As with any policy, employees could potentially abuse unlimited PTO. To combat, this consider placing certain guidelines within your organization that must be followed. Also, depending on your local laws, there is likely nothing keeping you from terminating an employee who does violate unlimited PTO.
The bottom line is to communicate to your employees that work requirements must be met in order to benefit from unlimited time off.
On the opposite spectrum, some employees may be afraid to take time off without clear guidelines. In these instances, it’s important for hiring managers to have an eye out for employees who aren’t taking time off. Having a conversation to encourage team members to take some time off is a healthy way to combat this often negative side of unlimited PTO.
Negative Effect on Work-Life Balance
In some cases, unlimited PTO could actually cause more stress rather than reducing it. Depending on the employee or manager, some people may have trouble and never really be “turned off” from work. Even if they go on vacation, they may feel the pressure to check and respond to their emails, without having clear, set guidelines that there are maybe 15 set days each year, where they are completely “out of the office”.
To solve this problem, encourage all employees and managers alike, to at least take ‘x amount’ of days each year and to fully utilize their ‘out of the office’ email replies on those days.
Utilize Your Employer of Record (EOR)
If you are trying to implement an unlimited PTO policy at your global company, first get your EOR organizations on board. Let them know what you are trying to implement and they will be a great resource at confirming potential problems associated with local laws.
Your Regional Office Locations
Also, notify your regional, in-house office locations, who can begin checking potential legal problems within their regions. Most likely you won’t have a problem implementing unlimited PTO. The risk is more largely associated with paid time off programs that don’t allow for enough time off, based on different laws.
The benefits of implementing this globally is that you will establish a standard of “One Company and One Culture” within your entire global organization. This also increases morale because all employees are able to share consistency within their vacation benefits. It establishes continuity and showcases the same value to each team member, regardless of where they live.
In fact, this is one of the rare instances where you are more likely to be able to have a global policy, as unlike with PTO, other benefits vary drastically between European nations and the U.S. For example, Europeans expect broad benefits packages with meal vouchers and gym memberships, whereas Americans are more concerned about health benefits. The U.S. also has no federal laws regulating paid time off, while Europe has strict regulations requiring paid time off and federal leave.
HR Management & Implementation
Transitioning from a traditional PTO structure to an unlimited PTO policy is a large task for any organization and depending on the size of your business, you will likely want to form a specific committee to help implement this.
Here are some issues that need to be resolved in the transition:
A major concern is deciding what to do with an employee’s existing PTO. This question also largely depends on the local laws. Your leadership will want to determine whether existing PTO needs to be paid out to current employees or not, and if there are any differences based on countries or states of residence.
For instances where you may have to pay out existing PTO, you will want to consider how much this will cost your companyin the short term , and then forecast potential savings in the long term and whether there will be a return-on-investment for the future.
In addition to issuing checks for existing PTO, there are two other, widely used options:
- You can issue an amount of time for employees to use existing paid time off.
- Or you can track the accrued time separately from the newly implemented ‘unlimited time off’ and still pay the accrued balance to employees upon termination of employment.
Modifying Time Off Requests
You’ll still want to track when employees are in and out of the office, so you’ll want to look at your current methods for requesting time off. This includes everything from how time is requested off to how much advanced notice is required.
If your organization is smaller and has a more informal approach to requesting time off, you may want to consider establishing a stricter set of guidelines to use with the unlimited PTO policy.
Metrics to Track Unlimited PTO and Instill Trust
Another major factor is determining metrics to track the success of your program, report results, and help your team identify if the program is being abused. Set guidelines to determine ‘red flags’ to look for and what’s acceptable and determine which software you’d like to use for reporting.
Now that you’ve made the decision to implement the program and you’ve established specific guidelines, you can start to think about how to specifically brand the program within your employee benefits and your culture.
Naming your Policy
As we mentioned before, naming your policy can be crucial in its success. Rather than calling your policy “unlimited PTO” consider a name that is unique and matches your employer brand. In addition, names that include, “personalized PTO” or “responsible PTO” are more likely to result in positive results across an organization, with employees taking initiative to use the program responsibly.
Next, begin to organize and schedule training for your management teams, followed by an even larger training rollout for all employees. Several training sessions that are open for Q&A at the end will likely be best.
As you prepare to launch, schedule meetings for feedback with different departmental heads. You could consider different benchmarks… perhaps a meeting 90 days after launch, followed by another meeting 180 days after launch. You may also want to set up an anonymous virtual suggestion box to take live, real-time feedback from anyone in the organization who would like to comment on the new policy. This also encourages an open-door policy for virtually any topic within the organization.
Communicate Changes to Employees
Consult with your internal communications department on appropriate methods to announce the changes, companywide. During the announcement, explain the training requirements and meeting options for those training requirements, along with deadlines to complete any independent training.
Also, if deemed appropriate, begin the process of incorporating the changed policy into things like your company’s mission, vision, or company values. To fully gain recruiting benefits from the policy, once things are set up internally and months after the announcement is made, work with your marketing department to begin looking at ways to promote and communicate the policy externally.
Legal & Compliance Concerns
A compliance concern in the U.S. is that employers are required to adjust certain performance expectations when employees take protective leave, such as under the Family and Medical Leave Act (FMLA). So regardless of your unlimited PTO policy, if an employee requires a longer amount of time off under FMLA, it should be reported and filed as such. This will require good training and continuous reminders from your HR staff to all of your departmental heads and management teams, so that leaders can be on the lookout for flexible PTO that’s being used for these purposes.
Also, in addition to laws that vary by country, there are laws by state, city, or providence that may need to be considered. For example, some states and cities in the U.S. have paid sick time policies. However, if you are implementing an ‘unlimited time off’ policy, chances are your policy will comply. However, you will want to do in-depth research in each market you cover, to make sure that you are 100% compliant.
After weighing the pros and cons, if you decide to implement an unlimited PTO policy, it may take a little trial and error regarding communication across your organization, but it’s very likely you will be able to make the policy work for your organization, hopefully reaping benefits in the form of financial rewards and profits, not to mention employee happiness, for years to come.