Crafting an Effective Unlimited PTO Policy for Modern Organizations

Paid time off (PTO) is a benefit that many small business owners provide to their employees. Although the Fair Labor Standards Act (FLSA) does not typically require PTO, many business owners offer paid vacation and personal days. And some employers even offer unlimited PTO. Have you considered implementing unlimited PTO for your employees?

What is Unlimited PTO?

Unlimited PTO allows employees to take as much sick time, vacation time, or other types of personal time as they want. However, unlimited PTO may not interfere with business operations and tasks.

Companies that offer PTO or vacation to their employees have the option to provide unlimited PTO. According to one source, one to two percent of employers offer unlimited PTO. But more and more employers are starting to embrace the idea of unlimited PTO.

Consider the following questions when implementing an unlimited PTO plan:

• How do you prevent employees from abusing unlimited PTO?
• How do you keep track of unlimited days used?
• When is unlimited PTO available to a new hire?

What should be included in an unlimited PTO policy?

Unlimited PTO policies vary. Consider the following sections when creating your unlimited PTO policy.

Introduction

Introduce employees to your unlimited PTO policy. Explain what employees can use the unlimited PTO for (e.g. vacation or sick time) and how they can take the time off.

Explain when employees can start taking unlimited PTO (e.g. 90 days after hire). Also address how full-time or part-time employment affects unlimited PTO.

Policy requirements

Be sure to set specific requirements for using unlimited PTO. Specify whether employees must take at least a certain number of vacation days per year.

Consider setting a minimum length of PTO. A minimum amount of PTO time helps ensure employees use PTO and don't run out.

Indicate whether or not employees can accrue vacation days. Also mention whether employees can receive compensation for vacation not taken.

Proceedings

A solid process ensures fairness and a more efficient system ensures unlimited PTO.

Add employee requirements such as:

• Communicate with the team about when they want to take their vacation
• Postponing and managing tasks and projects depending on when employees take their vacation
• Notify supervisors and managers in advance (e.g. two weeks)

Include procedures for approving requests, the maximum time you can approve, and reasons you may deny a request for PTO.

Disciplinary proceedings

Although every company is different, some employees may abuse the unlimited PTO policy.

Establish disciplinary actions (e.g., warnings or letters) for employees who use unlimited PTO.

Introducing unlimited PTO

Implementing unlimited PTO has many benefits, such as:  improved employee retention, company culture and budget. Weigh the pros and cons of unlimited PTO before implementing a policy.

One challenge with offering unlimited PTO is ensuring that employees use the opportunity in a healthy way (e.g. not taking weekly vacation). Before implementing an unlimited PTO plan, figure out whether or not your company can handle it. For some companies, e.g. For example, in retail or hospitality, unlimited PTO may not make sense.

If you decide to implement unlimited PTO, set a good example. Your employees should feel comfortable using PTO, but also not take up too much time off.

After you create an unlimited PTO policy, include it in your employee handbook or other new employee documentation.

Looking for an easy way to store and distribute your unlimited PTO policies? IceHrm HR software allows you to upload documents to share with your employees.