companies with unlimited pto

Unlimited Paid Time Off: Is It a Benefit Your Small Business Should Offer?

Gene Marks

Transcript

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Gene (00:02):

Hey everybody, this is Gene Marks and welcome to this week’s Small Biz Ahead podcast. Thanks so much for joining me. This week, I wanna talk to you about paid time off. When we talk about benefits that we offer our employees, health insurance, retirement plans, those are always like the most popular ones that employees ask for, but really there’s the top three. So it’s not just health insurance, it’s not just retirement, it’s it’s flexibility and paid time off, particularly vacation plans and sick days and all of that. A lot of employers ask what to do. I was talking to a friend of mine just the other day, she’s like a young woman in her twenties and she works for a company and she gets two weeks of PTO at the company she works for. She’s been there for like two years now and I just found that pretty unusual.

Gene (00:45):

Most of the clients that I talk to, most of the companies that I talk to around the country, they’re offering more than than two weeks. Maybe two weeks is a paid time off program that can be offered for maybe a first year just until you see if the employee is in it for the long term. But you certainly want to be a little bit more generous than that going forward. So, lemme tell you what I’ve seen a big trend towards and hold onto your seats, guys, but it’s unlimited paid time off. Now, let me explain to you why unlimited paid time off could really work for your business regardless of the size of your business. Are you ready? Well, for starters, there is a cost attractiveness towards doing it. Unlimited paid time off is a hugely requested thing.

Gene (01:31):

It’s a great thing to offer, but studies have shown that employees who have unlimited paid time off plans, they tend to take less time off over the period. Then if they have like a use it or lose it policy. It’s sort of a FOMO thing, a fear of missing out. You leave the decision up to the employee to take time off and they’re just afraid to like take too much time or not be around. So studies have shown that employees take anywhere from 10 to 15% less time off when there’s an unlimited paid time off plan. Now, there are some mental health concerns to be aware of but from a specific straight out cost perspective, unlimited paid time off plans can actually cost you less in paid time off benefits. In addition, there have been a handful of court cases around the country that have found in favor of employers, where employees leave the company.

Gene (02:24):

They don’t have to pay for any unused vacation. If a typical vacation plan, if somebody has accrued five days or 10 days of unused vacation and they leave the company, that’s compensation and has to be paid off. Well, there have been, like I said, a handful of court case that have said, listen, if you have an unlimited paid time off plan, you can’t really calculate it what your unused vacation is, so therefore an employer doesn’t have to pay it. So, from a cost perspective, not only do employees tend to take less time off on an unlimited paid time off plan, but they also tend to, you don’t have to pay them for from any unused time off as well. That’s a pretty big incentive for employees. Now, the other big incentive is this, it’s a huge, huge thing for recruiting employees. If you say to your new prospective employees or even your existing employees, Hey, we’ve got an unlimited paid time off plan, guy down the streets not doing that.

Gene (03:17):

That could be the difference to attracting that worker to your company other than anything else. So again, employees tend to take less time off with an unlimited paid time off plan. You don’t have to pay them from any unused vacation. And this is a huge recruiting tool to get new employees into your company. Now you might say like, oh geez, what? Unlimited paid time off, that sounds like a crazy thing for me to offer. Well, let me tell you how to do it the right way, and I’ve learned this from some of my clients that are doing it the right way. For starters, you don’t have to have just an unlimited paid time off plan into your company. You can have multiple paid time off plans. You can have a regular use it or lose it two week plan if that’s what you want to have.

Gene (03:58):

It’s just you offer an unlimited plan maybe after an employee’s been with you for a certain period of time, or maybe you just offer it to managers or senior managers. In other words, you can have multiple vacation plans within your company. That’s number one. Number two, if you’re gonna offer unlimited pay time off, that’s great, but one of the stipulations is, is that an employee can’t take any time off without the approval of their supervisor. So that means that if an employee comes and says like, “Hey man, this was great, I’m gonna go surfing in New Zealand for the next six months,” if that’s not gonna work into the supervisor’s plans or create a problem, it’s ultimately the supervisor that gets to approve whatever paid time off there is. So yeah, there’s unlimited paid time off, but there’s limits to it, right? There’s a control involved in it so that people just can’t take advantage of it.

Gene (04:48):

So you can do this, you can offer an unlimited paid time off plan to your employees. You can do it in combination with other plans. You can make them have to vest or be with your company for a certain period of time before they become eligible for the unlimited paid time off plan. And then you can control it by making sure that only supervisors can approve how much time you take off an unlimited paid time off plan. And if you can do that the right way, let me tell you something, you might be able to save on the amount of vacation time people are taking. You might be able to save on, on paying out for any unused vacation if an employee leaves your company. And for sure you’re able to provide a benefit that’s really in demand. That could be the difference between attracting that great employee to your company or losing that employee as well. So the takeaway is this, don’t poo poo unlimited paid time off plans. Think about it, talk to others. Formulate your own type of plan. Have the right kind of internal controls available. Make it only available to specific people after they’ve met specific criteria. You can offer it, you can do it. And what a great benefit to offer to those employees, not only working for you, but…

Gene (05:57):

To attract, new employees to your business. Unlimited pay time off plans – yeah, they really are reality. I’m seeing a lot of my clients do it. I’m seeing some of them do it really, really well. You might wanna consider doing it for your business too. Hey, you’ve been listening to Gene Marks. That’s me and I’m talking on the Hartford Small Biz Ahead podcast. If you’d like any tips or advice or help in running your business, visit us at SmallBizAhead.com or SBA.TheHartford.com. Thank you so much for listening. I will be back to talk to you again next week. Take care.

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6 Responses to "Unlimited Paid Time Off: Is It a Benefit Your Small Business Should Offer?"
    • Michael Koumas | December 8, 2022 at 8:04 am

      My opinion is that this Unlimited paid time off plan that you are proposing is deceptive to employees as well as disruptive to a healthy work environment for any company, large or small.

      3
    • Jane Coelho | December 7, 2022 at 2:44 pm

      How do you handle a long term employee who has earned the right to unlimited PTO, and then is out on FMLA for up to 12 weeks? All of this time would be paid under an unlimited PTO plan. Is there a carve out for bein on LOA?

      1
      • Gene Marks | December 8, 2022 at 4:51 pm

        That’s an interesting one! For starters if you have more than 50 employees you’re required to provide unpaid FMLA, if under 50 then you’re not. Regardless this is a policy that’s up to you. If you didn’t address this upfront when coming up with your unlimited PTO policy then you may be stuck. My suggestion is to work out something equitable with the employee and then revise your policy in the future to differentiate between “leave” and “paid time off.”

    • Bryan Neuhaus | December 7, 2022 at 7:34 am

      The unlimited PTO implies a high level of trust between the supervisor and employee, which I did not see expressly stated. There is a risk with the employee trusting the supervisor to approve ‘reasonable’ PTO requests. Also, how does the employer deal with legal challenges when one employee accuses the employer of favoritism by approving other employees more unlimited PTO.
      Just some things to consider when thinking about unlimited PTO, from a supervisory, employee, and business owner perspective.

      1
    • Randy Heller | December 6, 2022 at 5:47 pm

      Great, loved it!

      • Small Biz Ahead | December 7, 2022 at 8:33 am

        We’re so glad! Thanks for commenting.

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