By: Krystal Freeman on March 9th, 2015

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Is PTO Costing Your Company Too Much? Consider This Alternative Option

Risk Management | Benefits

Have you ever taken the time to evaluate your leave policy? Do you feel as though you it is costing too much money to pay out employees separating from employment? Well, as an alternative have you considered an unlimited vacation policy? Before you make any swift and quick decisions, let’s weigh out the pros and cons of this option for you and your organization.

Pros and Cons of Unlimited Vacation Policies

Fact 1: Builds an Employer Brand Image

  • Pros: An unlimited vacation policy is a major attractor for prospective candidates. You can highlight the policy in a benefit section on your careers’ site, provide an overview with prospective candidates you are phone screening/interviewing and lastly, provide finalists with a copy of this benefit as well as other benefits available.
  • Cons: This policy could tentatively attract the candidates that are coming to your organization "just for the benefits." I caution you against “just for the benefits” employees as typically they may or may not be willing to see your company succeed or have the desire to grow professionally. You want to hire an employee that shares the values and goals of your company so that you will grow together. To mitigate hiring a “just for the benefits” employee, take the time to vet prospective candidates on their work ethics, future goals, and how they feel they can contribute to your organization.

Fact 2: Promotes a Work/Life Integration

  • Pros: Implementing an unlimited vacation policy shows your employees you promote a work/life integration. Your organization believes an employee’s home life is just as important as their professional life.
  • Cons: Unfortunately, some employees may use this an opportunity to take off whenever they would like to without regard to work responsibilities and their team members. To alleviate any negative impact, when developing your policy allow new employees to only take a specific number of hours within a time period. For example, new hire employees can only take 40 hours of leave within their first six (6) months of employment. For tenured employees, make them aware of the amount of leave that has been taken and that although it’s unlimited, he/she must be mindful of other employees and their work responsibilities. For both tenured and new hires, require them to submit a leave request within a specific time frame prior to being off from work.

Fact 3: Financial Impact

  • Pros: Companies with an unlimited vacation policy have the option not to pay out vacation time to separating employees as the time is not accrued. This is an automatic savings to your company and does not have to be a line item on your budget.
  • Cons: This does not necessarily have a "con" to the company. However, be sure to explain to employees that upon separation employment they will not be paid out for any vacation leave.

Should you decide to implement an unlimited vacation policy, ensure your employees have a good understanding of the new policy as well as how and where to find the policy. Make the policy available in multiple conspicuous places such as the company intranet, sending it via e-mail, and sharing it during staff meetings, weekly departmental meetings, and one-to-one sessions. You can also have Human Resources hold a training for employees to attend. Lastly, upon providing employees with the policy, have them sign a document showing they have received a copy, know where to find it, and understand there is a policy implementation.