Is Unlimited PTO All That it's Cracked Up to Be?

Groupon, Netflix, Best Buy, Zynga, HubSpot, Virgin and ZocDoc are just a handful of examples of companies that offer an extremely rare perk in the US. It’s something called a vacation…unlimitedly!

Yes, that’s right.

Apparently, the folks at these companies get to take time off at their leisure.

Now, I know what you’re thinking. That sounds way too good to be true.

We thought so too. So, we decided to dig a little deeper and talk to companies that actually implement unlimited PTO as well as psych experts on its actual impact on productivity.

Turns out, unlimited PTO might be the exception to the old saying “if it’s too good to be true, then it probably is” – but only for some company cultures.

One such company is Media Minefield, a PR company that has had an unlimited PTO policy for two years.

“People need to be here enough to get their job and be gone enough to be healthy and recharged,” says Kristi Piehl, CEO of Media Minefield. “On average, employees are out about three weeks a year including their birthdays which should be celebrated and enjoyed outside of the office.” Here, here!

Smaller companies like these are catching on to stay competitive in recruiting top-tiered candidates, especially in today’s hot tech market.

But—realistically—do people really feel the freedom to up and leave whenever they like for however long they choose?

Or does bureaucracy result in some unwritten rules on when you can acceptably take vacation? In short: Yes, if your culture supports such freedom.

Here’s what we found:

One Prerequisite for Unlimited PTO is Established Trust

“To me, unlimited vacation is enabled by building a culture of honesty and accountability,” says Chris Maddern of Button.

Without a strong sense of trust and respect for others, unlimited vacation days are a recipe for failure.

“We truly encourage people to take time off when they want to, but to do so in a respectful way—not when others have major dependencies,” Maddern says.

It Works Best if Everyone Plans Ahead

So, with the holidays, how does any work get done if everyone’s missing in action? At Common Form, CEO Bill Hendricks requires his team to log their time off on a shared calendar.

“So everyone has visibility and we can identify any conflicts (being too short-staffed)…After a few days with family, most people are willing to be on call or code for a day,” he says.

Ownership: A Great Selling Point for Recruiting Top Talent

“Implementing unlimited PTO has further emphasized our ‘work hard, play hard’ mentality and it shows the new recruits that we’re serious about our culture and work environment,” the folks at Adboom told me in an email interview. “They appreciate the ownership that we have given them.”

Plus, if it’s implemented correctly, it’s actually a win-win scenario. “We knew that if we started to give them more freedom, not only would their creativity start to take off, but they would be given the liberty to start to act like business owners themselves,” the founders say.

Be Wary of ‘Choice Overload:’ PTO Freedom Could Be Better in Theory than Practice

Piehl is right. Studies show that time away from work does, in fact, increase productivity, job performance and lower levels of stress. But, “no matter how many days of vacation a company gives, an employee will always be fearful of being viewed as a slacker,” says Ian St. Clair, SEO specialist at Clicks and Clients.

This sounds great in theory, but—in practice—many employees are often afraid to take advantage in practical, day-to-day situations.

Sheena Iyengar, professor at Columbia Business School, told Quartz that unlimited PTO could result in “choice overload.”

“Some of her past research shows that when employees are deluged with too many mutual fund choices, it overwhelms them to the point of paralysis,” Bailyn writes. “They become risk-averase or unable to make a decision, which leads them to either make a low yielding investment choice—or, worse, not sign up at all.”

It can be tough to figure out the “right” amount to take if you’re offered “unlimited.” After all, we all know that if you’re too absent, it can harm subjective perception.

All in all, while there is definitely quite a few positive results from empowering people with unlimited time off, keep the risk in mind. It could backfire into a culture of fear if choice overload takes over or if everyone’s trying to one-up the other on how many vacation days they didn’t take.