What is Unlimited Paid Time Off and Could it Work For your Company?
What do Netflix, Adobe, Asana, Goldman Sachs, Atlas, Salesforce and Zoom all have in common? Aside from being recognizable brands with international footprints, they all offer employees unlimited Paid Time Off. It’s a practice that’s becoming increasingly common for knowledge economy companies.
So, what is it and could it be right for your company?
Unlimited Paid Time Off (UPTO) refers to the practice of giving employees greater control over the scheduling and duration of their time off, as long as their manager agrees they’re hitting the required milestones. It’s a radical shift from traditional policies that allocate a specific number of days off each year and it gives employees the flexibility to take time off when they need it, as well as improved work-life balance and fostering a culture of trust and accountability.
What is the adoption rate of Unlimited Paid Time Off?
But UPTO still isn’t a widespread practice. Netflix adopted the policy in 2003, but by 2019, only 6% of US employers were offering UPTO according to SHRM data. By 2023, that number was 8%.
It’s interesting that growth in UPTO is so modest. In the post-pandemic era of hybrid and remote work, this type of flexibility matters. Even before the pandemic, there were indications that employees valued more autonomy. A study from MetLife in 2019 found that 72% of workers were interested in working under an UPTO policy.
So why are employees so interested?
What are the employee benefits of Unlimited Paid Time Off?
There are a variety of different approaches to UPTO, each of which offers different benefits.
Flexible Vacation Days: Employees can take vacation days whenever they choose, without worrying about using up a fixed number of days.
Personal and Mental Health Days: Employees can take time off for personal reasons or to focus on their mental health and well-being, without needing to justify the time off or use a specific category of leave.
Flexible Time Off for Life Events: Employees can use UPTO to take time off for major life events such as moving, getting married, or attending family emergencies, without the constraints of a fixed PTO policy.
Trust-Based Time Off: This approach is based on mutual trust between the employer and employee. Employees are trusted to manage their own time off responsibly, ensuring that their absence doesn't negatively impact on their team or work deadlines.
How do these UPTO approaches play out in for companies that use them?
Adobe, for instance, states that there’s no specified amount of vacation days or paid time off for full-time employees. Employees are encouraged to work directly with their manager to arrange the time off they need when they need it.
Morning Brew offers unlimited sick and vacation time to all of its employees, while Netflix has a Work Life Philosophy that outlines its stance on UPTO. “Time away works differently at Netflix”, it says. “We don’t have a prescribed 9-to-5 workday, so we don’t have prescribed time off policies for salaried employees, either. We don’t set a holiday and vacation schedule, so you can observe what’s important to you—including when your mind and body need a break.”
And employees seem to value UPTO. Github’s PTO and unlimited vacation days are their most important benefits alongside health care when ranked by employees. 70% of Github employees claimed it was the benefit they valued the most.
What are the employer benefits of Unlimited Paid Time Off?
The benefits to employees are clear. But what about the employer?
In knowledge economy roles, where flexibility is prized, UPTO is a key tool for employee satisfaction and talent retention. In a competitive talent market, any policy that offers flexibility and supports a culture of employee autonomy, can help companies secure and keep the best talent.
This is especially the case when employees are handling challenging life experiences, according to MetLife’s Annual U.S. Employee Benefit Trends Study, 2024. 41% of employees who felt cared for when dealing with bereavement said their employer had flexible time off policies. 38% of employees who felt cared for when dealing with mental health issues said their employer had flexible leave policies.
It also removes the need for extensive tracking and administration of time off, allowing managers and HR teams to focus on more strategic initiatives. This can lead to cost savings and increased operational efficiency.
When does Unlimited Paid Time Off Not Work?
But UPTO isn’t always a success. Some companies have tried it, only to find it didn’t work for them.
Ironically, the reason seems to be that workers with UPTO may feel they should take fewer days off than those with a fixed allocation of days. US-based networking company Facet, a full-service staffing and recruiting firm abandoned UPTO when it found workers were taking fewer holidays. London-based recruiting company Unknown cancelled its UPTO scheme when it found that employees felt guilty and never took time off. The CEO wrote: “Research shows that humans work best when they’re given clarity. And tokens to spend instead of something undefined.”
As mentioned earlier, Netflix believes in UPTO, but the streaming giant found that there was one critical element in ensuring that employees actually took time off: they needed to see their bosses take time off too. When he was CEO, Reed Hastings mandated that the company’s leaders take significant time off and talk about it. And he walked the walk himself, taking six weeks vacations a year.
In general, there are some industries and company cultures where UPTO is not a good fit. Typically, it is not a one-size-fits-all solution. Sectors or cultural dynamics. where UPTO may be a poor fit are outlined below:
High-Dependency or Regulated Roles:
Industries like healthcare, manufacturing, customer service, financial services, aviation, and transportation rely heavily on consistent staffing and compliance with strict regulations. UPTO in these sectors can lead to staffing shortages, workflow disruptions, safety concerns, or non-compliance with regulatory requirements.Small, Resource-Limited, or Seasonal Businesses:
Small businesses, start-ups, and companies in seasonal industries often operate with limited resources or tight schedules. UPTO can significantly impact operations by straining resources during critical periods, leading to staff shortages, lost revenue, or missed deadlines.Performance-Driven or Low-Trust Workplaces:
In performance-based cultures like sales teams or competitive workplaces, employees may avoid taking time off to maintain their standing. In low-trust environments or those with poor management structures, UPTO may lead to misuse, lack of accountability, or imbalanced workloads.
Could Unlimited Paid Time Off work for your Company?
The first thing to do is evaluate whether UPTO is a good option for your organization. Companies where consistent staffing is crucial, resources are limited, or where there is a culture of high dependency, intense competition or low trust, may not be well-suited to UPTO.
It’s also worth making sure the benefits of UPTO align with your businesses challenges. It should work well for the workplace culture that you’re trying to cultivate and how competitive hiring is in your sector and the employee benefits needed for talent retention.
A good UPTO policy should clearly outline the expectations, guidelines, and procedures for using unlimited paid time off. The key elements that any policy should cover are:
Purpose and Alignment:
Clearly state the intent of the UPTO policy, aligning it with company culture and values, such as promoting work-life balance and trust.Eligibility and Criteria:
Define which employees are eligible for UPTO and specify any probation periods for new hires.Usage Guidelines and Approval:
Outline the process for requesting and approving time off, including notice periods and manager approval to ensure business needs are met.Expectations and Coverage:
Set clear expectations around work coverage during absences, maintaining performance, and ensuring that the policy doesn’t disrupt team productivity.Limitations and Legal Considerations:
Address any peak periods or excessive use restrictions, clarify that UPTO doesn't replace other types of leave, and ensure compliance with relevant laws.
It’s worth remembering that no policy will work without training and a clear communication plan around its roll out.
The policy should be communicated to employees, with details of any associated training or information sessions to help employees and managers understand its aims and implications. Manager Training is crucial. Managers need to have a clear understanding of how to handle UPTO requests fairly and consistently and to manage team workload and coverage effectively.
If you’re exploring UPTO policies, it’s important to remember that these new ways of working indicate a new form of social contract between firms and modern employees, who demand more flexibility and trust. Each company must find its own path and test its own policies. This is a process that can take time, involves some trial and error, and can feel risky.
But in our experience, the firms that don’t experiment at all are the ones that will alienate existing staff and fail to attract and retain new talent in the modern workforce. And that’s the biggest risk of all.