Microsoft announced that its U.S.-based employees would get unlimited paid time off starting January 16.
Microsoft currently has an accrued time off policy where employees would accrue days based on how long they’ve worked there and then would get paid out once they leave the company. Under the new policy, employees will still get 10 corporate holidays, leaves of absence, sick and mental health time off, and time away for jury duty or bereavement alongside this new unlimited time off policy. Employees who also have an unused vacation balance will get a one-time payout in April. However, this policy doesn’t apply to hourly workers or employees outside the U.S. because of federal and state laws around wages and regulations regarding time off in other countries.
Microsoft joins the ranks of several other tech companies that offer unlimited PTO, including Salesforce, Oracle, and Netflix. According to Kathleen Hogan, Microsoft’s chief people officer, “How, when, and where we do our jobs has dramatically changed,” explains Hogan in the internal memo. “And as we’ve transformed, modernizing our vacation policy to a more flexible model was a natural next step.”
Yet, unlimited PTO is the opposite of flexible. And employees know that. In light of the announcement, “unlimited PTO” was trending on Twitter, with people responding with their thoughts.
This post from John DeVore has over 5 million views and illustrates that there are still limitations with when and how employees can take it. Employees have horror stories about being expected to work while on PTO, coming back early from trips to address a “pressing” project, and being asked to change the dates of already approved PTO to address a company’s needs. Unlimited PTO undermines an employee’s work-life balance because they feel like they always have to be “on,” which leads to more burnout and stress.
A negative impact on company culture
Unlimited PTO also affects a company’s culture. Vague policies, which are often associated with unlimited PTO, can come with discrimination. In this case, if people appear to be taking too much time off are deemed not “valuable” or “dedicated” to the company. Because your time isn’t tracked or earned with unlimited PTO, your boss doesn’t have a concrete record of the time you’ve worked or the time you’ve taken off. Therefore, they can perceive you a certain way versus what’s fact, leading to sexual, racial, or gender bias.
While many employers think they're offering flexibility when they institute "unlimited" PTO policies, the effect on diverse employees could be to create even more anxiety around taking the vacation time they've earned. Diverse employees often feel like they're already under a microscope at work and don't want to invite unnecessary scrutiny.
It’s about the employers, not the employees
This Twitter thread from Christina Warren addresses another common problem with unlimited PTO: It’s not really about the employees—it’s about the employers.
Typically, when PTO is accrued, and an employee leaves or is laid off, the employer owes you that in the form of a cash payout. It’s part of your salary, and you accrue it. However, with unlimited PTO policies, the employer doesn’t have to pay you anything when you leave, or they lay you off.
Unlimited PTO is used as a tactic to improve the company’s financials by removing the need to pay out unused vacation time when an employee leaves the company, which is legally required by some states. Companies don’t want to have to accrue the liability through their P&L and onto their balance sheet.
Microsoft plans to give its employees a PTO payout for any accrued PTO—but not until April. So what if it does another round of layoffs between now and then? Will employees still get their PTO payout since the unlimited PTO policy will have gone into effect?
Consider flexible benefits instead
As Warren also points out in her thread, the problem isn’t how much PTO a company offers its employees—it’s getting employees to take time off. This is where flexible benefits can come in.
Flexible benefits present a commitment to diversity, equity, and inclusion (DEI) much better than an unlimited PTO policy does. A one-size-fits-all benefits package gives your employees the individualized support they need because not all employees prioritize the same benefits. If you have a multigenerational workforce, you’ll find you have Baby Boomers that want help navigating Social Security, Millennial and Gen X parents who want to take more PTO to spend time with their kids, and Gen Z’ers who want wellness benefits. With a traditional benefits package, you have difficulty accommodating all these needs.
But flexible benefits are just a start. More employers are giving their employees a choice when it comes to compensation, letting them customize how much of it is salary, equity, and benefits. It represents a broader approach of companies giving employees a say in their work situation, from when and where they work, shorter work weeks, and trading unused PTO for retirement contributions, student loan repayments, and even travel.
The future of unlimited PTO
As more companies are looking to cut costs, expect more movement to an unlimited PTO model from an accrued model. But that won’t come without its challenges as employees realize they’re nothing but collateral damage to save a company’s balance sheet. If a company really cared about its employees, it would institute flexible benefits to meet their evolving needs and demands.
Learn how to turn your unused PTO into retirement contributions, travel, charitable giving, and more with PTO Exchange. Request a demo today.