The Unexpected Limits of 'Unlimited' PTO

Imagine you’re a recent university graduate, applying to their first ‘real’ job. All you’ve known of work so far is your zero-hours contract at the pub down the road. There, taking a holiday simply meant not getting paid for a while, but you had to be careful: turning down too many shifts in a short space of time meant you might be struck off the rota for good.

Or, imagine you’re a mid-career professional who’s only ever worked in rigid, large corporations, and you’re considering making a change. To you, annual leave is a valuable, limited resource that is strictly regulated and hotly contested. Requests for leave must be announced months in advance and approved by at least three different people – and you’d better hope none of those people want a holiday in the same week. If you run out of your allowance in the middle of the year due to external commitments, well, tough: you’re working every five-day week until January.

 

So, for either of these examples, the offer of unlimited paid time off would sound incredible. Unfortunately, it’s also somewhat hard to believe. It doesn’t take a rocket scientist to figure out that “unlimited” doesn’t mean you can mug off work altogether and get paid to sit on a beach all year reading the entire works of Sir Terry Pratchett (as wonderful as that would be).

So, clearly, there are limits after all. The real question is… where are they?

 

Let’s begin by asking how much annual leave people usually have in the more traditional model. Here in the UK, the statutory minimum is 28 days, which includes public holidays. Lots of businesses will stick to this minimum, but many offer more for the purposes of talent attraction and retention, frequently including policies like adding an extra day for every year of service. This amounts to the average allowance for the country totalling 33.7 days a year.

What’s important to note about this figure is that it’s gone down over the last couple of years. From 2022 to 2023, the average holiday entitlement decreased by 3.5%. But what’s more shocking is that the amount of holiday taken decreased by more than twice that: 7.7%. So, who’s not taking their annual leave, and why?

According to research from Timetastic, only about 40% of workers in the UK took their full entitlement of annual leave in 2023. The reasons varied as to why the rest didn’t: some just didn’t want to; others felt under pressure from management; the most common reason, however (other than ‘No specific reason’), was that they were compensated for any unused days. And herein lies an important issue with unlimited PTO: what if someone doesn’t take any? Should someone who takes 2 months of leave in a year be compensated the same as someone in the same role who never takes a day off? Of course, if you’re asking that question, there’s a more crucial one behind it: why isn’t the second person taking time off?

 

Sometimes, employees don’t just need the ability to go on holiday. They need to be actively encouraged. Some businesses force their teams to take a certain number of days in a certain period to discourage burnout. Others send reminders when an employee hasn’t taken any leave for a long time. For most, however, the set number of days an employee can take per year serves as its own reminder – if it’s October and you’ve taken 21 of your 28 allotted days, you automatically start thinking of when you’ll use that final week. If there’s no maximum, however, you’ll find people struggle to find a minimum, too…

Despite the implications of a limitless amount of holiday, Sorbet’s 2022 PTO report found that in the US, those with unlimited holiday took an average of 30% less leave than those with a more traditional model. This is often due to some industries having a culture that frowns upon taking time off. Within these environments, workers feel less confident sending PTO requests because the line between allowed and acceptable is blurred. It’s better to play it safe and keep working than risk a bad performance review for a “lack of commitment”.

A policy like this can be doubly confusing – stressful even – for your neurodivergent employees. Often, neurodiverse people require specific structures in order to feel comfortable. Telling one of these employees they can have as much PTO as they want can be distressing as they know that, in a literal sense, this is untrue. So, unsure of the upper bounds of such a policy, a neurodiverse person may default to the easier-to-know lower bound: not taking any leave at all.

 

While we have gone into the potential pitfalls here, it’s important to wrap up this article by giving the benefits of an unlimited PTO policy. Research has shown that employees with unlimited PTO are more likely to report better work-life balance and job satisfaction. Also from an administrative perspective, the time not spent tracking and adding up unused or accumulated days in a banking system can add up to 52 days’ worth of time saved. Of course, this is not to mention the effect that such a policy has on your Employer Value Proposition.

 

So, if you’re considering – or already have – an unlimited PTO policy, here are a few ways to make the most out of it:

• Establish a minimum: Employees must take ‘x’ days within a given period, and are free to request additional leave on top of that.
• Give an approximate upper bound: Instead of calling it ‘unlimited’, perhaps call it an ‘open policy’, and say that requests above a given amount will be considered on a case-by-case basis.
• Lead by example: Send out comms when the leadership team takes a break. While this may sound like bragging, it reminds everyone they have the same opportunity and encourages them to take it.
• Send reminders: Some people simply forget they have the option. Set up an automation within your PTO software that notifies someone if a certain amount of time has gone by since the last time they took some leave. Or, if that’s not within your ability, send out quarterly reminders to everyone.

 

If you think your HRIS may be in need of updating before you implement an unlimited PTO policy, make sure you register your interest in attending HR Technologies UK 2025, where our exhibitors will be more than happy to guide you.