Unlimited PTO vs. Accrued PTO: Which is Better?

By Marketing - Aug 9, 2022 12:33:21 PM - 9 MINS READ

Let’s face it, we all need a break.

Whether you have a work-to-live or a live-to-work persona, there is one thing for sure: we tend to overwork ourselves. Are we to blame? Not necessarily. We often design our work ethic based on our managers and other higher-ups. No matter your position at a company, a little paid time off never hurts anyone, so why shouldn’t we use it?  

That said, companies often decide to go one of two routes for their PTO policies: unlimited PTO or accrued PTO. 

An unlimited PTO policy allows employees to take off as many days as they want each year. For obvious reasons, unlimited PTO has been a huge request from job seekers, increasing job postings with unlimited PTO by 178% from 2015-2019. 

In contrast, with an accrued PTO policy, employees earn paid time off days over a period of time. This time can be accrued hourly, weekly, monthly, annually, or per pay period. Typically, employees on an accrued PTO system average 10 days of PTO per year. Do you tend to stay with a company for long periods of time? With accrual PTO, the most loyal employees are rewarded with PTO benefits. For example, an employee who has been with the same company for less than two years will receive fifteen days less than an employee who has been with the company for five years or more. 

So… which policy is the best?

Unlimited PTO

The trend these days for job seekers? A company that prioritizes a work-life balance. However, unlimited PTO also can only be successful if you have a culture that emphasizes work-life balance and everyone at every level takes time off. Unlimited PTO benefits employers over employees in that employers avoid keeping track of days off and cashing out their employees’ unused PTO days.

Pros

  • Saves the company money by not having to pay for unused days at end of the year. Typically, if you’re on an accrued PTO model, you have to pay out employees for unused PTO days at the end of the year, a huge expense for employers. Unlimited PTO is a way of getting around that.
  • Less paperwork from not having to track reasons for time off. With unlimited PTO policies, employees don’t have to keep track of their PTO unless a manager requests it, leading to fewer headaches and accountability for managers. 
  • Good recruiting tool. The allure of “unlimited PTO” draws candidates into the hiring process, which might be a good strategy if you’re on a hiring spree. 
  • More flexibility for time off during the year. Maybe you’re getting married, have a family vacation, and want to take some time off for yourself in the coming year. Ten days of PTO make it hard to do that, which is where unlimited PTO can be beneficial. 
  • Higher productivity and morale. Unlimited PTO helps improve employee engagement and productivity by giving people a chance to rest, recharge, and recover.  

Cons

  • The “never working employee.” Unlimited PTO can produce less productive employees because they’re always taking time off, leaving colleagues to wonder if they’re working or not. 
  • The “always working employee.” Unlimited PTO can result in employees taking even fewer days off than those with accrued PTO. 
  • Employee anxiety around taking too much time off. Employees often worry about colleagues' and managers' perceptions of taking too much time off, which often happens with unlimited PTO.
  • Overlapping time off can lead to lower productivity. With unlimited PTO, multiple people across different teams could take time off at once, leading to project bottlenecks and lower productivity levels. 
  • Counterproductive if managers and executives don’t take time off. A good example starts from the top down, so if your executives and managers aren’t taking regular time off, you won’t feel encouraged to take advantage of your unlimited PTO policy.

If you’re concerned about how much time off your employees take, you may want to re-evaluate your time off policy. Additionally, if you have Gen Z employees in your workforce, you best believe they’ll be taking advantage of the “unlimited” aspect of your PTO policy.

Accrued PTO

Even though accrued PTO requires more work to earn, employees are treated with more value with this policy. Accrued PTO often provides more value to employees than unlimited PTO, especially if employees can self-direct unused vacation days to causes and areas that are valuable to them. That said, accrued PTO benefits employees more than unlimited PTO, as you can be compensated for the value of your time off. 

Pros

  • Can self-direct the value of your unused vacation days. With accrued PTO, your vacation days have a value associated with them, which can be turned into financial value, whether it’s to pay off student loans, donate to a charity, or donate days to a colleague in need. 
  • Works better for some industries. Industries requiring someone to work around the clock or have seasonal “busy seasons” might benefit from accrued PTO over unlimited PTO.
  • Employers can easily track time off and calculate costs. If you have a certain number of days of PTO, it’s easy for managers to keep track of how many days you’ve taken and how many days you have left. You can also track the value of those days too. 
  • Benefits the employee more than the employer. You won’t get cash out for unlimited PTO if you quit or don’t use all your days. With accrued PTO, employers have to keep accountable for the number of days their employees have throughout the year. 

Cons

  • Limited number of days per year. If you have a lot going on throughout the course of the year, 10 days of PTO might not cut it, so you either can’t take the time, need someone to donate days to you, or take unpaid time off. 
  • “Use it or lose it” policy. Many companies don’t roll time off over from year to year so you need to use it within the year or risk losing it, which leads to employees taking unnecessary time off just to avoid losing it. 
  • Financial liability on the company if an employee quits. Often, if an employee quits and still has accrued PTO left for the year, they have to cash out the value of the PTO to the employee. 
  • Employee dissatisfaction. If employees feel like they don’t have enough time off to take a vacation, they’ll feel less satisfied than employees with adequate time off. 

Just because your PTO is accrued or limited doesn’t mean it’s bad. If you have an adequate number of days that satisfies employees’ needs and the option to self-direct unused days, then accrued PTO might be viewed more favorably than unlimited PTO. 

Even the scale 

Determining which PTO policy is best for you is no easy task. Most employees want to feel they have flexibility over the days they want off, while employers don't want to be financially liable for unused days. Best solution? Tell your organization to make flexibility the forefront of their PTO policy, which can work for unlimited and accrued PTO.

The bottom line, PTO in any form only works if you actually take it. Encourage your employees to take PTO, with managers and executives setting the example by taking PTO themselves.  

Lay back, and relax

PTO is no longer a perk—it is a necessity. Keep your organization competitive and productive by providing a PTO solution that will come in handy no matter the situation. 

PTO Exchange can help you self-direct your accrued PTO to make it more valuable today. Talk to your HR department and contact us today to learn more. 

Marketing

Related Posts:

Left Your Company? You Might Be Entitled to a PTO Payout

Aug 25, 2022 8:00:00 AM - READ TIME 7 MINS

Regardless of why you left a company, there is always some sort of offboarding involved. Before emba...