3 Truths About Unlimited PTO — Why Employees Are Worse Off With Endless Vacation Days Three truths that might make you reconsider the appeal of unlimited PTO.
By Veetahl Eilat-Raichel Edited by Chelsea Brown
Key Takeaways
- What unlimited PTO really means for employers and employees
Opinions expressed by Entrepreneur contributors are their own.
The allure of unlimited Paid Time Off (PTO) is undoubtedly tempting: infinite vacation days, the promise of work-life balance and the freedom to manage one's own time. But dig a little deeper, and the dream seems less paradisiacal. It's time we address some of the unspoken realities of this increasingly popular employee "benefit."
Here are three truths that might make you reconsider the appeal of endless vacation days.
Related: An HR Specialist Explains Why Unlimited PTO Can Hurt You In The Long Run
Paid time off (PTO) is part of your negotiated salary; start acting like it!
When we break down our remuneration package, we often consider our base salary and other perks like a healthcare package. For instance, the average healthcare benefits package makes up about 30% of a salary's worth. So, if you're earning a $65,000 salary, you could be looking at an additional $27,855 in benefits, bringing your total compensation to a handsome $92,855.
However, one significant component in this calculation is frequently overlooked: vacation days. Like health benefits, these days have quantifiable value which translates to additional dollars and cents. Whether your company offers a "use it or lose it" policy or a traditional carry-over PTO policy, $3,000 is the average value of annual accrued, unused PTO that a U.S. employee holds. This locked compensation is either lost entirely (alleviating the company of any liability owed to the employee at termination) or is only accessible when that employee ultimately leaves the company (a nice and often overlooked bonus for the employee, and a not-so-nice, unexpected expense for the company).
Yet, many of us disregard this, treating PTO as a luxury or afterthought rather than a hard-earned part of our salary package. It's time to recalibrate our perspective and recognize the total worth of our compensation.
Employees with unlimited PTO take fewer days off
One might assume that employees would be more inclined to take extended breaks with no cap on vacation days. Surprisingly, the opposite is true. On average, an American worker takes 17 PTO days in a year. In stark contrast, those blessed with unlimited PTO only take an average of 10 days off.
Why this discrepancy? The potential reasons are manifold, but one significant factor stands out: the fear of perception. Although always a factor, perception has changed drastically due to the significant influence the pandemic had over our work culture as we knew it. Employees might hesitate to frequently avail themselves of their PTO to avoid being perceived as taking undue advantage or appearing less committed to their jobs. And although 44% of U.S. employees said they prefer a hybrid work model, 31% think it's more difficult to take time off when working from home. The lack of a defined boundary can paradoxically create a culture where taking time off becomes a rarity rather than a regularity.
According to Sorbet's 2022 PTO Report, although unlimited PTO policies only represent 8% of overall vacation policies offered in the U.S., the unlimited model is up 400% since 2019. This points to companies catching on to this notoriously bad policy with good marketing efforts that actually help alleviate the company of any debt owed to employees at the end of their relationship.
Related: Unlimited Paid Vacation: 'Jedi Mind Trick' or Good Policy?
Unlimited PTO is benefitting someone, just not you
Another possible explanation? Employers' motivation to create a culture that encourages and incentivizes PTO usage.
At face value, unlimited PTO is a generous offering — a company prioritizing the well-being and autonomy of its workforce. This policy is positioned as if it's an amazing benefit for employees, when in fact, it's bad for employees and amazing for employers.
Here's the catch: Under traditional PTO policies, employees accrue a fixed amount of time off. If they utilize only some of their days, they can often cash out their unused days or roll them over to the next year. This means companies have a financial liability for every unused vacation day. But with "unlimited" or "flexible" vacation policies, this liability disappears. Workers aren't accruing specific days off; hence, there's no compensation for unused days. The shift to such policies can save companies billions, erasing a substantial financial burden off their books.
As with many things, the devil is in the details. While unlimited PTO might sound idyllic on the surface, the underlying truths reveal a different story. Employees need to understand the intricacies of their benefits package, ensuring they're truly getting the best deal for their well-being and financial future. Before getting swayed by the allure of endless vacation days, it's worth pondering: Who really benefits from this arrangement?
