Breaking the limits

Some companies offer employees opportunities to take prolonged time out of the office through an unlimited paid time off policy. They say it can reduce costs by improving employee retention and creates a professional workplace culture of highly motivated employees. On the flipside, they point to potential downsides for business, and admit that unlimited isn’t always as unlimited as it suggests.

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Can an unlimited vacation policy motivate employees while reducing costs for companies?

Have you ever dreamed of taking two months off work to explore that tropical country you have always wanted to visit, or do a safari in Africa, or go for a long hiking trip in the great outdoors?  I know I fantasize about doing this regularly.  But like most workers in the U.S., I only get a few weeks paid time off a year. And quite frankly, my boss probably wouldn’t be too happy with me being out of the office for an extended period of time so that I can satisfy my itch to travel. 

Some companies however do offer employees opportunities to take prolonged time out of the office through an unlimited paid time off policy. Many managers might find it hard to believe that you can allow employees to take advantage of this policy and run a successful business. But companies interviewed for this article swear that it can reduce costs by improving employee retention and creates a professional workplace culture of highly motivated employees. On the flipside, they point to potential downsides for business, and admit that unlimited isn’t always as unlimited as it suggests.   

Oregon Business magazine interviewed five employers to find out how the benefit works at their organizations.

Renee Spears, head of mortgage broker, Rose City Mortgage, felt it was only fair to offer her employees the same policy that she can take as the owner of the company. It is among the firm’s most popular benefits, she says. One of the biggest pluses: she saves costs on hiring and training employees because she has little turnover. “Most people have been with us for over 10 years. That is unusual in the mortgage brokerage industry,” says Spears.

How long do employees typically take off? One employee at the mortgage broker took two months off to live and work in Hawaii. Another employee was out for six months after having a baby. And one staff member last year took one week of vacation every month. But most staffers take two to four weeks off at a time for a total of about eight weeks a year, says Spears.

To make the benefit workable employees usually give several months notice if they are taking a few weeks off for vacation. But they can also just take the day off without giving forward notice. Only a few times a year in the summer does Spears usually have to cover essential administration work for multiple employees that are out at the same time.    

For some companies it is difficult for staffers to take off for a prolonged period despite the benefit.  At Mad Fish Digital, a marketing and advertising agency, staffers that want to book time off are first required to ensure their clients are served and they meet their monthly deliverables. In reality this means that an employee could take one month off at a time, but it would be a challenge to take longer than that, says Corrie Herman, co-founder of the agency.

Mad Fish Digital, which has 15 employees, offered unlimited paid time off to its workers a year and a half ago after finding it was cumbersome for people to manage a fixed quota of sick and vacation time. “Nine times out of ten we would have conversations with staff members where we would tell them to go and do what they needed to do,” says Herman.

So far the longest time out an employee has taken is 10 days for traveling. Usually people take time off for long weekends or for planning self care, such as going to the gym, the doctor or the dentist, she says.   

An upside is that the company attracts employees who are good at managing their time. “Any time you bring more freedom into a job it brings out a different caliber of employees. People who are interested in flexibility do not need management to manage their time for them,” says Herman.

But she adds the firm does need to spend more time hiring the right person. “It has made our hiring practice longer so that we understand that they fit into the work environment.”

Offering unlimited paid time off is an important part of creating a professional workplace culture that many firms aspire to. Kim Bailey, managing partner at professional services consulting company PeopleFirm, says the unlimited paid time off policy reflects the kind of smart, professional culture the firm wants create. “We all manage our own schedules and all participate in the direction of the firm. Our benefits mirror this.”

Despite the freedom to take prolonged periods off, Bailey says he often has to prod staff members to take advantage of the benefit. “Healthy, happy employees are productive. Part of being happy is spending time out of work. I review PTO twice a year. Oftentimes I am telling people not to forget it.”

Typically employees at PeopleFirm take two to four weeks off a year in addition to paid holidays, while a couple of staffers have taken two to three months off at a time. The firm treats the more prolonged time out of the office as sabbaticals that may or not be paid based on the individual. Staffers have to formally request to take time off so the firm can ensure it has enough coverage. “Mostly it is not an issue,” says Bailey.

The size of a company may be one limiting factor in being able to offer the benefit. It is easier as a small company to offer unlimited paid time off, says Bailey. As the firm grows larger it is harder logistically to balance all requests for PTO, he says.

Mammoth, a HR consulting company, found that as it grew larger it needed to create guidelines to manage the policy effectively. It instituted the benefit about two years ago after hearing about unlimited paid time off as a workplace trend.  As a HR consultant, management wanted to use their company as an incubator to test out the policy.

The result: It is great for employee morale and retention, says Elise Raher, people operations lead at Mammoth.  But the company prefers to call the benefit ‘personalized PTO.’ “Unlimited is a misnomer because there are guidelines,” says Raher.

Those guidelines ask employees to evaluate whether they can balance workload; whether their team can manage the burden while they are out; and whether they are in good standing with the company. It introduced the parameters after a couple of people took time off that made it hard for them to balance their workload. As the company’s workforce grows, having clear guidelines for taking time off are becoming more important, says Raher. Mammoth has grown to 51 employees from around 20 when it first offered unlimited paid time off.

Mammoth evaluated the policy after one year and found employees on average were taking about three weeks paid time off a year. This is almost the same as what they took before the benefit was introduced. It shows employees have good “self regulation,” says Raher.

Amy Weedon, co-founder of business consulting firm Propeller, also calls the company’s unlimited paid time off policy a misnomer because it is not like employees are able to take months off at a time, she says.

As a consulting firm, a lot of Propeller’s revenue is based on billable hours that its employees spend with clients. Consultants have a target to work 1,900 hours a year on client projects and internal company work. Employees often spend long hours outside of the office at clients’ sites building trust with the customer, says Weedon. But once consultants build rapport with clients, they often have more flexibility to set their own schedule.

 “Folks want to feel in control of their work. It is tied to happiness. Flexibility adds to satisfaction,” says Weedon.

As workplaces evolve and companies experiment with policies aimed at giving employees more freedom and flexibility, bold new benefits like unlimited paid time off might become more commonplace in U.S. workplace culture.

When put into practice unlimited paid time off might not turn out to be as unlimited as it appears. As some companies that have introduced the policy have found, it is not always possible for employees to take more than a few weeks off a time. But the policy is still a big leap forward for U.S. corporate culture that traditionally has not provided workers with generous vacation time compared with other countries.

As the economy improves and companies have to work harder to attract and retain employees, unlimited paid time off is the type of benefit that will put companies at the forefront of a growing trend towards employee empowerment and work life balance.