To court top talent in a tight labor market, small-business owners may want to get creative. Offering competitive compensation and benefits can be a great if not necessary start, as can embracing the era of full-time remote-work to open up the potential candidate pool to global talent. Among the few competitive levers would-be hirers have left exist in the realm of perks.
One such perk that’s been on the business radar has been unlimited paid time off, or unlimited PTO. As an on-paper policy, unlimited PTO promises exactly what it states—employees can take as much vacation time as they like, provided they’re able to do their jobs effectively. In practice, the policy has had mixed results—some experts and business owners report a more engaged workforce while others think it has the opposite effect.
Two Business Class contributors, Amber Anderson and Scott Steinberg, explore the pros and cons of unlimited PTO. To sharpen your perspective and determine whether it can help you grow your talent pool, read both of their takes below.
Unlimited PTO Retools Culture and Drives Productivity
Opinion by Amber Anderson
More than just an excellent way to win over potential talent with forward-thinking perks, unlimited PTO can increase productivity among employees in the workplace. That’s because to be successfully implemented, an effective unlimited PTO policy requires that organizations first take stock of what they expect from employees, how they hold them accountable, and how they measure productivity and effectiveness.
In other words, unlimited PTO can drive productivity and be a key output of a company-wide culture and policy overhaul that retools your business for a more competitive future.
Dismantling Concerns About Productivity
Reluctance surrounding unlimited PTO as a workplace policy can arise from management worried that if invited to, some employees will take too much time off. But some businesses that have embraced and implemented the policy have found the opposite to be true.
“We considered [unlimited PTO] and then started hearing from companies that people actually end up taking less time,” said Jenny Poon, founder of both the entrepreneur platform HUUB and the coworking center CO+HOOTS.
This unexpected phenomenon may be the result of office cultures that equate less time off with a stronger work ethic. A 2019 survey conducted by TurnKey Vacation Rentals found that 54.2 percent of respondents "feel guilty about using their vacation time," which can be the result of some company cultures putting an unbalanced premium on relentlessness (The survey reflects the opinions of 2,016 full-time American employees.)
Employees in those situations may feel pressured to avoid using their PTO altogether, even if they need a break. And at companies with unlimited PTO, where employees are not given a set amount of paid days off but instead elect to take them only if they choose, a judgmental undercurrent that sweeps favor away from anyone who decides to indulge in a vacation can stir if left unchecked.
This can have an especially deleterious effect on women. Senior-level women, for instance, are nearly 15 percent more likely to feel exhausted at work and yet are 10 percent more likely to feel pressure to work more compared to senior-level men, according to Leanin.org and McKinsey’s 2020 Women in the Workplace survey of 40,000 people from 317 companies. They may feel more judged for using their PTO compared to their coworkers.
This is all to say that leadership concerns about unlimited PTO about productivity are valid, but for the wrong reason—productivity may drop not because of policy abuse, but because of a company culture that equates time-off with a lack of ambition. In other words, if unlimited PTO is driving down productivity at your company, it may be a symptom of a larger problem of culture.
The Case for Unlimited PTO and How to Successfully Implement It at Your Company
Companies that have fostered a culture that honors work-life balance are most likely to experience a productivity boost from unlimited PTO. It’s a “money-where-your-mouth-is” commitment that leadership promises its employees, which can go a long way in strengthening the relationship between the leaders of the company and its workforce.
To ensure your unlimited PTO plan empowers everyone to take the time they need, you can designate a minimum number of annual PTO days to encourage more use, and create boundaries (e.g. the maximum days you can take off in a row) to reduce abuse. You may also work with a member of your HR team or an HR consultant to ensure your standards are legally, financially and culturally sound before you make the switch. Additionally, building a supportive workplace that values the quality of work over the hours spent at a desk can offer people the freedom to feel equally invested in their work, their families and their communities while alleviating some burnout and stress.
“When we focus on productivity, output and what we're getting done, there never ends up being abuse of the unlimited PTO,” said Ryan O’Connell, chief operating officer at the digital marketing agency Boomn.
When you hire qualified and motivated employees who care about the work they’re doing, you don’t have to micromanage them. Redefining success based on goals instead of hours can help foster a more productive workplace while accepting and encouraging taking personal time.
Create space in the workday to talk about vacations, family time and outside interests so PTO usage becomes a visible, celebrated aspect of your company culture. The pandemic gave us all a glimpse into the home lives of remote coworkers, but just because you can’t see it on a screen doesn’t mean that aspect of their lives is gone.
To further understand the motivations and needs of today’s empowered workforce, start by identifying your ideal employee—their needs, motivations, and limitations—and then make sure your company is set up to attract and support them once they're onboard.
By rethinking how your company approaches this group of individuals, you’ll be able to create lasting relationships and build a multifaceted, high-performing team that is supported and satisfied for years to come, all while offering a key perk that may just give you the competitive edge when hiring talent.
Unlimited PTO More Marketing Tool Than Sound Policy
Opinion by Scott Steinberg
As a boutique strategy consulting firm owner and a futurist who advises corporations on the future of work, not only am I all for providing employees with greater flexibility in working models, I’m also all about crafting win-win flex-work arrangements that help businesses and workers collaborate more effectively and better manage work-life balance.
But despite the obvious popularity of unlimited PTO, a policy wherein employees can enjoy as much free time off (so long as it doesn’t affect their productivity and work), remember that it comes with drawbacks. Although unlimited PTO can prove a nice marketing point that helps you attract high-caliber talent, it can also result in inconsistent access to staffers, greater demands on executive leadership and (on occasion) perceived inequalities and instances of bias, among other concerns.
To echo Amber’s point—employees (at least here in the U.S.) simply don’t take vacation. A December 2020 survey of 1,200 employed Americans by The U.S. Travel Association reveals that Americans still left an average of 33% of this paid time off unused last year. An increasingly popular option amongst startups, high-growth firms and other businesses hoping to attract talent in the wake of COVID-19, unlimited PTO is alluring to increasingly stressed and sleep-deprived households.
But as good for employee morale and well-being as extra days of sun and fun are, and as promising as PTO sounds in practice, don’t forget: Implementing an unlimited PTO policy can prove a massive challenge for businesses that are unpredictable, operate on tight turnarounds or rely on skilled and experienced workers. If you are working to fixed deadlines and deliverables and well mapped-out project roadmaps, unlimited PTO may not payoff for you.
Case in point: Like many small-business owners, our firm is frequently hit with unexpected requests from out of left field by clients. We often have to shift gears on a dime to address a widely-different number of goals and tasks and we can seldom predict when customer-driven needs or demands will arise. While it might be possible to manufacture a new product or construct a piece of software, it’s not always simple to roll out a crisis communications strategy in response to breaking news, knock out a whitepaper on a suddenly trending topic or provide product feedback and testing on a tight turn when half your team has their phones shut off.
If you’re in a line of business with predictable workflows, staffing needs and routines, your business might be able to integrate unlimited PTO. But if you’re a small-business practitioner in an industry that’s prone to abrupt shifts and unexpected twists in timing, such as public relations, social media management or content production, the model quickly begins to break down. It can deteriorate even further the smaller your operating team is, especially if you’re heavily reliant on key hires with specific knowledge and training or subject matter experts who may be unavailable on-demand.
The Society for Human Resource Management points out that unlimited PTO is often more of a marketing tool than functional practice in the working world—and a selling point that companies offer prospective hires to appear more competitive. Whether because they feel more accountable or are less aware of the specific ins-and-outs of the policies associated with these programs, employees with unlimited PTO actually take fewer days off on average than those on traditional PTO plans, as PwC's March 2021 Workforce Pulse Survey of 1,515 US-based adults states. Even more confusingly, many employers (and employees) have to rely on an individual manager's own discretion—which can differ from manager to manager—to determine if this time off is being utilized wisely or abused, leaving room for ambiguity (and the risk of perceived bias). What’s more, regardless of how many days unlimited PTO employees actually capitalize on, their presence in a workforce can also create resentment and perceptions of favoritism among other hires if not all enjoy access to the same perks, or some workers enjoy the ability to access them more freely than others.
In theory, unlimited paid time off seems like a dream come true for workers—and a great selling point for a company to promote to potential hires. In practice though, it doesn’t always work out. Arguably, a better approach is to embrace the concept of flexwork—offering flexible working setups and schedules, potentially tailored to individual workers’ needs—to address any concerns about time off instead.
Read more articles on employee retention.
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