Unlimited vs. Accrual PTO: Which Model Wins for Compliance, Culture, and Costs? 

The modern workplace has redefined what employees expect from their PTO policy. As organizations compete for top talent and seek to foster healthier workplace cultures, the question of unlimited PTO vs. accrual PTO has become central to HR strategy. Both models have their advocates and their pitfalls. Which approach is best for your company depends on your goals, your workforce culture, and your compliance obligations. 

This blog explores the pros and cons of each model, looking at their impact on compliance, culture, and costs, and providing the insights you need to craft the best time off policy for your organization. 

Understanding PTO Models: A Quick Primer 

What Is Accrual PTO? 

Accrual PTO is the traditional model in which employees earn time off incrementally, often tied to hours worked or tenure. For example, employees might accrue one day of paid leave per month, reaching 12 days a year. This method is predictable, structured, and widely understood. 

According to the International Foundation of Employee Benefits, accrual systems remain the most common PTO policy in the U.S., especially in industries with hourly workers and unionized environments. Importantly, accrued PTO carries monetary value. It’s an earned benefit that, in many states, must be paid out at separation. Employees can therefore think of it as part of their overall compensation package. 

What Is Unlimited PTO? 

Unlimited PTO, on the other hand, allows employees to take as much time off as they need, as long as their work is completed and their absence doesn’t disrupt operations. Pioneered by companies like Netflix and HubSpot, unlimited PTO has gained traction in industries where output, not hours, defines performance. 

Newsweek recently reported that only 2.9% of job listings on Indeed offer unlimited PTO, down from 8.8% in March 2022. According to U.S. News, around 7% of U.S. companies offer unlimited or other times called flexible PTO benefits. 

Unlike accrual PTO, unlimited PTO does not accrue as a tangible, dollar-valued benefit, which can be a downside for employees who see PTO as part of their earned compensation. 

Compliance: Staying Within the Lines 

Accrual PTO and Compliance 

One of the biggest strengths of accrual PTO is its compliance clarity. Many states, including California and Illinois, treat accrued PTO as earned wages, meaning that any unused time must be paid out when an employee leaves the company. 

According to the U.S. Department of Labor, federal law doesn’t require employers to offer PTO at all, but state laws often impose specific requirements if they do. With accrual PTO, employers can document precisely how much time employees have earned and used, reducing risk in disputes. 

Employees benefit too, as accrued PTO gives them a clear, assignable dollar value they can plan around, providing peace of mind and financial security. 

Unlimited PTO and Compliance 

With unlimited PTO, no specific amount of time is accrued and thus, in states like California, no payout is legally required at separation. This can reduce liabilities for employers, but at a cost to employees: unused PTO no longer has monetary value. 

Inconsistent application can also open the door to claims of unfair treatment. According to SHRM, companies offering unlimited PTO should still document requests and approvals to ensure compliance and equity. 

Verdict: 
✅ Accrual PTO wins for clarity and predictability in compliance-heavy industries and gives employees a tangible, compensable benefit. 
✅ Unlimited PTO can reduce liabilities but removes the financial reward employees are accustomed to receiving. 

Culture: What Employees Really Want 

Accrual PTO and Culture 

Accrual PTO provides structure and transparency, which many employees appreciate. They know exactly how much time they have and can plan vacations accordingly. According to a Pew Research survey, 46% of U.S. workers feel they don’t get enough paid time off , even in accrual systems, so having a clear allotment is important. 

Employees also value the fact that accrued PTO translates into real dollars if unused, essentially acting as a form of deferred compensation. 

Unlimited PTO and Culture 

Unlimited PTO sends a powerful message of trust and autonomy. It aligns with modern workplace values, particularly among millennials and Gen Z, who prioritize work-life balance and flexibility. An HR.com article provides analysis that suggests that unlimited PTO can improve employee morale when paired with strong cultural support and leadership modeling. 

However, employees can feel conflicted about unlimited PTO. Without a clear accrual, they lose the ability to “bank” PTO and view it as an earned, monetary benefit. Employees leaving a job with unlimited PTO typically walk away with nothing, unlike those under accrual policies who may receive a PTO payout. 

Verdict: 
✅ Unlimited PTO resonates with workers who prioritize flexibility and autonomy, but can feel less rewarding financially than accrued PTO. 

Costs: Counting the Dollars 

Accrual PTO and Costs 

With accrual PTO, unused balances create a financial liability on the company’s books, especially in states that require payouts. Employers must account for these liabilities, which can be significant for large workforces. 

However, employees see this liability as an asset: accrued PTO gives them something tangible to count on, and they often factor it into their personal financial planning. 

Unlimited PTO and Costs 

Unlimited PTO eliminates the accrual liability, which can result in meaningful cost savings for employers. Yet this cost savings often comes at the expense of employees, who lose the monetary value of their earned PTO. 

CBS News notes that while unlimited PTO reduces payroll expenses tied to unused vacation payouts, employees may view the policy skeptically if they feel it strips away a benefit they’ve come to see as part of their total compensation. 

Verdict: 
✅ Unlimited PTO can save employers money, but accrual PTO offers employees a concrete financial reward. 

Which Model Wins? 

The answer, of course, is: it depends. 

For compliance-heavy industries, unionized workplaces, or roles with rigid scheduling, accrual PTO is the safer bet. For flexible, results-driven environments where culture is a competitive differentiator, unlimited PTO can give you an edge — if implemented thoughtfully. 

Best Practices for Either Approach 

1. Set Expectations: Even with unlimited PTO, establish clear guidelines and minimum usage expectations to avoid underuse.

2. Communicate Value: For unlimited PTO, acknowledge employees’ concerns about lost accrual value and emphasize the trust and flexibility the policy represents.

3. Monitor and Measure: Track usage patterns to ensure employees take sufficient time off.

4. Model Behavior: Encourage leadership to take time off and normalize the practice. 

Final Thoughts 

Your PTO policy sends a powerful signal about your company’s culture and values. Both unlimited PTO and accrual PTO have their place — the key is aligning the policy with your goals and clearly communicating its value to employees. 

While unlimited PTO offers flexibility and saves on costs, it deprives employees of a tangible, earned benefit. Accrual PTO, while more rigid and administratively burdensome, provides employees with something they can see, count, and even cash out if they choose. 

For more insights on crafting effective PTO policies, read our related posts: 

• Unlimited PTO: Revolutionary Perk or Risky Policy? 

• The Productivity Paradox: Do Employees Really Take Time Off with Unlimited PTO? 

By designing a policy that balances compliance, culture, and cost — while honoring employees’ need for tangible rewards — you can create a time off policy that supports your workforce and your business.