Job Searching? Here's What to Know About Unlimited Vacation

How does unlimited vacation work? Some large companies have started to offer unlimited paid time off, but is the policy really employee-friendly?

Kathryn Underwood - Author

Mar. 6 2023, Published 12:49 p.m. ET

An office with employees working.
Source: Unsplash/Israel Andrade

Does your employer make it easy to take time off? What about unlimited PTO?

Unlimited vacation sounds like a dream, naturally. Who wouldn't love endless days lounging in bed without an alarm, the chance to easily take off a day when you or a loved one is sick, and freedom to determine your schedule? Some companies now offer unlimited vacation, or unlimited paid time off (PTO). But how does unlimited vacation work?

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An unlimited vacation policy is largely about employers trying to forge a better relationship with employees. If employees don't have to hoard their precious sick days, perhaps they'll work more efficiently and loyally. However, unlimited PTO isn't quite the employment utopia it looks like on the surface.

People on vacation at the beach
Source: Unsplash/Ezequiel Garrido
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How does unlimited vacation work?

Vacation time from work is also commonly referred to as PTO, or paid time off. Employers typically offer a fixed number of days for employees to be absent from work for illness, personal reasons, or vacation. Some employers lump all PTO together, while others specify the number of days for each absence reason.

Unlike this PTO hack that entails taking extra days off around holidays to get more extended breaks from work, unlimited PTO means that your employer theoretically doesn't limit how many days off you can take in a calendar year. However, the employer or manager still must sign off on all PTO, and often there are rules about specific times of year when PTO isn't allowed except for actual emergencies.

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In general, an unlimited vacation policy can foster trust between employer and employee, offer greater employee flexibility, and save companies money. But as with any workplace initiative, there are pros and cons to consider, from both the employer and the employee perspective.

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What are the pros of unlimited PTO?

For employers, unlimited PTO can mean the company no longer needs to track employees' days off. In addition, where in traditional arrangements employers may have to pay out any unused sick leave when an employee leaves, with unlimited PTO, the company can save that money because there isn't a set number of days employees must receive.

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For employees, unlimited PTO is a benefit because you shouldn't have to worry whether you'll have enough sick leave during a year when your family is frequently ill. You can take off a mental health day occasionally. You might feel you have more autonomy over your life and schedule, which makes you feel more positive about work.

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Goldman Sachs building
Source: Getty Images

Goldman Sachs announced unlimited PTO for senior staff in 2022.

What are some possible downsides of unlimited PTO?

However, giving employees unlimited vacation time isn't entirely a slam-dunk. As the BBC reported in 2022, workers don't necessarily need unlimited vacation, but prefer flexibility above all, including the option to work from home.

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Another problem with unlimited PTO is that instead of receiving an allotment of vacation days per year, employees have little to no guidance on how many days are acceptable. They must request all time off, and sometimes will avoid the stress of approaching the manager for approval. The BBC reported that a 2018 survey showed workers took fewer days off when they had unlimited PTO versus a fixed number of days.

Another downside is that even if on paper, the company offers unlimited time off, workplace culture might not reflect that priority. In many industries, management could look more favorably on workers who put in more time, putting them up first for promotions and raises. Employees might also compare themselves based on how much vacation time each person takes, which could cause friction among staff. (Whether or not management approves PTO for one person over another could also lead to conflict.)

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Peter Cappelli, a professor at the University of Pennsylvania's Wharton School of Business, said, "People don't take vacations now, even when they're accrued. The reason is there's pressure on them not to do it."

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Why do companies give unlimited vacation?

Employers are beginning to offer unlimited vacation primarily as a way to attract new talent. The COVID-19 pandemic prompted a major shift in what employees were willing to accept at work. More employees are demanding remote work, hybrid work, and even a 4-day work week, so unlimited PTO is a way to draw those people in. Whether it turns out to be as much of a benefit to workers as it seems depends on how the policy is implemented.

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