Ever since Google transformed the workplace with ping pong tables, sleep pods, free haircuts, fitness equipment, laundry facilities and on-site medical staff, companies have been tweaking employee benefits to attract and retain top talent.
One increasingly prevalent enticement is unlimited vacation time or PTO (personal time off), otherwise known as a "discretionary time off" model (DTO). Does this signal the demise of the standard two week vacation and five sick days per year? Can an employee take a paid sabbatical and lounge on the beach for a month? And can employees actually stay home sick instead of coughing and sneezing all over their co-workers, so they don't burn a day that could later be used for vacation?
According to a 2014 WorldatWork study only about 2% of companies offer this kind of alternative-vacation model. Still, we're curious to learn how this perk might impact employers and employees. What is driving this change? Is unlimited vacation something that all businesses should consider?
Unsurprisingly, the first companies to offer unlimited time off are based in Silicon Valley. Driven by a focus on producing results, rather than just logging hours, tech companies like Kickstarter, LinkedIn, Netflix, Indeed and Evernote sought to encourage employees to create a better work/life balance and manage their time accordingly.
More recently, larger mainstream corporations including General Electric began offering their senior salaried employees uncapped vacation days. Grant Thornton adopted an unlimited time off policy late last year. LinkedIn also recently announced it will allow employees to take unlimited vacation days. There are some caveats: LinkedIn employees can't opt to work a four-day week, for example. And they can't take months off on end.
One HR executive commented, "It's about time we treat our workforce like adults. Professionals will take vacation when they are able and with technology keeping everyone connected all the time, no one is unreachable." This week, J.P. Morgan announced a new initiative called "Pencils Down," encouraging its investment bankers to take non-essential weekends off, joining the ranks of other Wall Street firms that have acted to retain employees and improve work-life balance. The firm didn't specify how much time employees should take off, or how often they are expected to check work-related emails while away from the office. But the announcement is clearly a move toward freeing people from time-consuming work obligations after hours and on weekends unless a deal is breaking.
Logistics vary, but most companies with discretionary time off programs require employees to schedule time off in advance, generally through an online tracking system such as ADP, or email. Sick days typically require notification as well. And although time away is "unlimited," managers and HR departments retain the discretion to deny requested time if it becomes excessive, or issue warnings when employees appear to be abusing the privilege.
From the employer's perspective, introducing an unlimited time off policy minimizes the financial burden created by the employee who hoards vacation time - Me. Astonishingly, U.S. companies carried forward $65.6 billion in accrued paid time off costs last year. According to a study by Oxford Economics, U.S. workers who had paid time off typically left three vacation days on the table.
Allowing employees to self-manage their time away from the office also frees up managers and HR professionals from the administrative burden of tracking time off. Moreover, a flexible vacation policy can help build an ownership mentality, encouraging employees to think and behave with an eye on the company's bottom line.
Providing scheduling flexibility also fosters trust and loyalty between employers and employees. An analyst at a technology company told us that she and her co-workers value being empowered and treated as adults in managing their time. They appreciate the message signaled by leadership: we trust you to know when you need time off in order to be the best employee you can be. For companies looking for an edge in attracting top talent, unlimited time off is a valuable recruiting tool. An unlimited time off policy can also be a strong employee retention tool for valued employees. A senior manager at a growing technology firm stated that although her firm's discretionary time off policy is new, it has created quite a "buzz" among employees, building goodwill and boosting morale.
As with most novel and untested programs, time will tell what the future holds for alternative time-off models. Company leaders will have to lead by example by unapologetically using their own personal and vacation time and clearly communicating expectations. With the many pros and cons, it is incumbent on each company's leadership to determine if, and how, to implement this fresh take on employee benefits.