Unlimited, Limited, Minimum: Does the PTO Plan Type Matter?

With summer vacations on the minds of most workers, paid time off (or PTO) is a hot topic for both employees and employers.

Back in 2018, we examined the use of PTO days across our clients and found that the average days taken by employees had surprising outcomes: those with unlimited PTO took only 13 days off yearly compared to those with traditional limited time off plans, who took 15 days.

And for a long time, this has been the party line across HR folks: Unlimited PTO doesn’t work (or does exactly what it’s supposed to do, if the goal is to not pay out employees for unused time off). 

Historically, employees earned paid time off based on the number of years of service they had with the company. Under this model, HR and payroll professionals needed to manage time off closely as it involved calculating accruals, carryovers, and forfeitures. Unlimited PTO, on the other hand, doesn’t need to be paid out if unused, nor does it need to be listed on a company’s balance sheet. 

Several years ago, companies started touting these “unlimited” paid time off plans—and it was a much-desired employee benefit according to MetLife’s 2020 Employee Benefits Survey. Under the definition of an unlimited plan, employees are permitted to take as much time off as they want, with the expectation that they will continue to get their work done in a timely manner. Popular among start-ups and high-growth organizations competing for talent, unlimited PTO puts control in the hands of the employee, giving them flexibility and entrusting them to manage their time effectively.

But based on our 2018 research, this didn’t appear to really be the case. Many experts blamed the murkiness of these plans on their lack of usage. They said that employees felt like they couldn’t take time off or that they felt confused about how much time off was actually acceptable without a limit. 

But as COVID-19 restrictions began to ease across the country, we at Namely couldn’t help but wonder: has anything changed when it comes to PTO usage? 

So, we examined the PTO plan types and usage for a subset of our clients – 1,000 companies. And we saw changes in how these plans are being utilized as pandemic restrictions ease.

Our new research uncovered that employees with unlimited plans now averaged 12.09 days per year versus only 11.36 days for employees for limited plans. Not only has the trend flipped, but employees seem to be taking off less time overall, and the variance between unlimited and limited PTO has diminished significantly. 

“Since we last conducted this research, the number of companies offering unlimited paid time off has increased to 34.5 percent,” said Amy Roy, Namely’s Chief People Officer. “Clearly, unlimited PTO has gained credibility as an employee benefit, but to what end? Regardless of their company’s plan, workers seem to be taking less time off.”

This is a particular concern given work-life balance, one that is leading some employers to offer unlimited PTO with a minimum requirement.

“There’s no doubt that the continued uncertainties created by the global pandemic, economic indicators, and political unrest are impacting the American workforce. Researchers say that more than 212 million vacation days get forfeited annually,” continued Amy. “Employers concerned about the wellbeing and retention of their workers encourage the use of paid time off, as it gives employees the chance to reset and refresh.”