An unlimited paid time off plan is just that: a benefit allowing an employee to take as much vacation time as he or she desires. For some employers, the idea seems outrageous. But that attitude is changing.
About 20% of corporate respondents in a recently released survey from asset management firm Mercer say that they offer unlimited paid time off to at least some employees compared with 14% two years ago. Unlimited paid time plans are becoming a “top emerging benefit,” according to a 2019 study by insurance firm MetLife and are already a significant part of the benefit offerings for many larger corporations. Seventy-two percent of the 2,675 full-time employees surveyed in the MetLife study expressed interest in receiving unlimited paid time off.
Unlimited paid time off plans are starting to make more sense for more employers. And for a few good reasons.
It’s a very enticing benefit to offer prospective employees in the current tight labor market. A survey of more than 1,500 U.S. workers released earlier this year found that the top most requested benefit — for the third year in the row — is paid leave. Remote working and family leave are the second and third choices, ahead of even health insurance.
Thanks to the pandemic, millions of workers and their employers are more used to working from home. Employees are less supervised and job performance is being evaluated more on what’s being delivered as opposed to hours spent. Companies that want to attract the best talent are quickly realizing that they need to offer flexibility and the ability to self-determine work hours.
“I also believe that unlimited paid time off is a great retention method, as well,” says Anthony Mongeluzo, president of technology consulting firm PCS Inc. in Moorestown. “You can always go somewhere and make more money but they might work you very hard with no additional compensation or bonus.”
Marc Brownstein, president and CEO of Philadelphia-based branding firm Brownstein Group, agrees. “Unlimited paid time off is a great recruiting and retention tool,” he says. At Brownstein’s firm, workers can take up to two weeks off at a time after working more than 90 days. “Our culture is based on mutual trust, so the policy works because it rarely gets abused.”
Another surprise for employers: The costs are also not as much as some fear.
That’s because paid time off can be controlled. The benefit, for example, can be offered to certain employees such as management, salaried workers, or those who have worked for the company for a certain period of time. In addition, a plan can be designed to allow vacation only after a supervisor approves, so there’s little risk of an employee disappearing for a significant period and during an inconvenient time.
For example, at Relay Network, a Radnor-based customer service technology platform that offers unlimited paid time off for its employees, requests for leave are submitted for review and approval at least five days in advance, unless in the event of an emergency. In addition, for any extended absence (greater than five consecutive days), employees must submit a formal request, get approval from their immediate supervisor, and meet with their immediate supervisor before their departure in order to review work coverage and outstanding deliverables.
“We consider our policy a privilege that can be amended at any time, if abused,” says Joey Goldberg, Relay Network’s director of marketing. Goldberg says employees are empowered to take time off because “sometimes you just want to take your kids to go ride the roller coasters on a Tuesday. We won’t stop you.”
There’s also another potential cost savings. Some studies have found that employees actually take less time off than when they have a traditional “use it or lose it” plan. It’s why a 2010 Center for American Progress study found that a lot of employees believe taking too many days off work would cost them bonuses, promotions, and even their jobs. That may sound good for the bottom line, but smart employers also know that taking too little vacation can be potentially detrimental to their employees’ mental health. Some owners, such as Brownstein, worry that employees will burn out if they don’t take enough vacation and frequently encourages staff to take advantage of the benefit.
“The irony of unlimited paid time off is that our employees actually take less vacation time, and that is certainly not what we intended,” says Brownstein. “Our business has a lot of pressures and deadlines. We want our employees to be fresh, relaxed and have new perspectives and experiences to draw upon from their vacation travels.”
Finally, recent court cases have found that, under many circumstances, employers offering unlimited paid time off plans don’t have to pay out unused vacation time when an employee leaves a company. Because how do you calculate vacation owed when there’s unlimited vacation available?
Not using vacation time seems of little concern to Mongeluzo, though. “Our team seems to do a great job utilizing their unlimited paid time off and spending it with their family, taking extra vacations, or extending their weekends,” he says. “I’m glad they take the time because they earned it.”
Gene Marks is a certified public accountant and the owner of the Marks Group, a technology and financial management consulting firm in Bala Cynwyd.