I honestly can’t wrap my head around this no matter how much I read.
In: Economics
All the numbers show most people take the same or less with “unlimited” PTO vs fixed in similar positions or before the change. it’s still subject to approvals and you no longer have a set amount that is your right but you can suffer for “abusing” it, whatever your manager or policy decides that means. Essentially it puts you in the same position as when someone asks what pay you’re looking during an interview. You could, theoretically, ask for anything but many people wind up low balling themselves trying not to lose the opportunity entirely. Only now it’s every time you consider a vacation.
There are some other aspects, if you would normally get paid out for accrued PTO on leaving then you have no PTO to get paid for, for example.
Mostly it’s just that it tends to play out as a mind game that ends in people taking less vacation, though.
1. Because at most companies it’s not truly “unlimited.” There’s an unspoken limit (usually around 3 weeks) that puts you on the short to find other work elsewhere when the time comes if you go over it.
2. It’s not in your favor. Companies are required to keep money on their books to cover your salary when you take regular PTO. In most States, they’re required to pay out that money when you quit or get fired. Offering “unlimited” PTO means they don’t have to do that, so it can screw you if you need money to cover the gap time between quitting a job and starting your next one. It also means that you can’t “save” PTO and use it for an extended vacation (or large payout when you quit) at some point. It makes corporate accounting easier, though. So there’s that.
Employees that get unlimited PTO are actually shown to take less PTO. [https://www.bamboohr.com/blog/benefits-limitations-unlimited-vacation](https://www.bamboohr.com/blog/benefits-limitations-unlimited-vacation)
Also for jobs with a structured PTO Plan (let’s say 80 hours a year), if the position is eliminated, or you leave on good terms with the company, there is usually a payout of the accumulated hours of PTO as a “second” paycheck as you earned it as part of your compensation for working for the company
Unlimited PTO doesn’t have a payout.
Source — myself as I’ve had PTO Plans and am currently on an unlimited PTO
No payout of your accrued time off if you leave the company + employees with unlimited pto take off less time on average vs those with set days
Limited PTO is money. If you have a policy with your company where you accrue 2 weeks of PTO per year up to a limit of 4 weeks, when you leave the company, they owe you the salary for the PTO you didn’t take. It’s money.
I have never reviewed an employment contract that involved unlimited PTO, but I assume that’s no longer the case, because if your PTO is unlimited, they can no longer assign a dollar value to the time you take off.
When you couple that with the toxic workplace relationship US companies have with actually taking vacation time, “unlimited vacation” is the worst of both worlds.
Two things:
1. When you leave a company they often are supposed to pay you for the remaining vacation days you had accumulated. With unlimited, they dont have to pay you anything. When uve been at a company a long time and accumulated a lot of days, this can be a hefty bonus.
2. On average, companies with unlimited pto actually have employees take less pto than companies that have set days of pto. Unlimited pto is often a trap as people feel pressured to work and actually using the unlimited pto liberally is often discouraged or sometimes ur pto requests can be straight up denied depending on company culture. And if all ur peers use very little pto, u also feel the pressure to not use pto. As a result, u actually end up using less days than a company that gives an assigned number on average. U COULD be the sole person taking advantage of it but u will have a target on ur back come layoffs or have less chances of promotions
No need to pay you for unused PTO at the end of the year. Some companies have 5 or 10 day PTOs and will give employees the option of carrying them over or getting paid. Also, unlimited PTO is a scam because they know you won’t take many and if you do, it’ll be frowned upon.
It generally benefits the employer, though it can be decent with good management.
Management generally has a lot of ability to refuse PTO requests. With bad management, they can basically refuse any PTO requests, making unlimited PTO look a lot like no PTO. This can also be a problem with accruing PTO, however there are often more legal protections for accruing PTO, and it will be better documented.
Without good guidance on how much PTO they should take, employees are likely to request less PTO to avoid feeling like they are over requesting. This might result in employees only requesting 3 weeks instead of using 4 weeks accrual, and this can easily occur without the employee even noticing it. At the same time, the employer is likely to track request amounts and penalize employees who use too much.
There is then the fact that some jurisdictions have PTO payout rules. For example, in California, PTO is considered earned wages and *cannot* be legally reduced without reasonable ways for the employee to use the time first – generally, the rule is you can accrue 1.5 times your PTO per year. Upon termination, any outstanding PTO accrual *must* be paid out in California at final wages in the same manner as any other wages. However, unlimited PTO is legally treated as no PTO, and thus has no accrual and no legally required payout.
That final point is actually *why* unlimited PTO started to be a thing. On paper, unlimited PTO sounds good to employees, and much better than an offering of, say, 4 weeks of PTO per year. However, the loss of protections in California lead to a lot of tech companies preferring unlimited PTO as it leads to less liability on the company balance sheet.
On the other hand, if you have a good employer, unlimited PTO *can* be a net win. If applied well, it gives the employee a lot more flexibility as to how to use PTO then an accrual system does.
As others are saying, if you leave, nothing is paid out because you haven’t accumulated anything. And again, as others mentioned, sometimes there’s an unspoken limit, or realistically, you’ll never see more than 3 weeks.
Now that being said, I’ve regularly taken 5 weeks at my unlimited pto job and NEVER been told “no,” although a couple of times had to hop on a work call for something crazy urgent. I’m not even like top-level or anything.
So it can work out. But usually, it’s in the company’s interest, not yours.
People have covered why it’s often bad, but it’s important to understand that it’s good at plenty of companies.
I’ve only been at my company for 3 years and take 7-8 weeks of pto every year.
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