A Pew Research Center study found that 45% percent of American workers left their jobs because they didn’t have enough flexibility, with 39 percent claiming that too many hours led to their decision to leave. So, it’s no surprise that paid time off (PTO) is one of the most wanted employee benefits.
What you’ll learn
What you’ll learn
Updated: March 6, 2025
Key takeaways
- Unlimited PTO gives employees more flexibility and autonomy to request as much time off as they need
- Adopting an unlimited paid leave policy can help attract and retain talent, reduce administrative burdens, and boost employee satisfaction and productivity
- Without the correct rules in place, unlimited PTO also presents challenges, including employee abuse and liability issues
- Properly implementing the new policy is key to helping employees and your business get the most from unlimited PTO
To attract and retain qualified staff, more small businesses are offering employee benefits that promote work-life balance, including unlimited PTO. But how does unlimited PTO work, and is it worth it? Below we discuss unlimited time off advantages, challenges, and ways to integrate it into your company’s PTO policy.
What is unlimited PTO?
Put simply, an unlimited PTO policy is a type of paid leave benefit that lets employees take as much time off as needed as long as it doesn’t affect their work performance or interfere with the company’s operations. Unlike traditional vacation policies, which have a limited number of PTO hours, employees can request as much paid leave as they need.
However, this doesn’t mean staff can just skip work when they feel like it and still get paid. Like other time off policies, employers must establish clear rules and approval processes for requesting PTO — even with unlimited vacation time.
Unlimited PTO versus flexible time off (FTO)
While unlimited PTO and flexible time off (FTO) are often used interchangeably, FTO typically doesn’t offer unlimited paid leave. Instead, FTO can be used for any reason, such as vacation, sick leave, bereavement, or life events that require an employee to miss work.
Similarly, unlimited PTO generally doesn’t distinguish between the reasons an employee needs time off. The main difference is that unlimited PTO doesn’t cap the number of hours off an employee can request, while FTO does.
Advantages of unlimited PTO
Businesses adopt an unlimited PTO policy because it has several advantages for both employers and employees. The flexibility attracts potential applicants while easing some of the company’s administrative HR challenges. Additionally, offering this option can boost employee satisfaction and productivity.
Attraction and retention of talent
Small and medium-sized business (SMB) owners know how valuable a good employee is to their bottom line. However, a shortage of qualified labor is one of the biggest challenges facing businesses right now. Offering unlimited PTO and other SMB benefits can give you an edge over the competition, help you attract the best talent, and encourage employee loyalty.
To understand how unlimited time off can be a boon to the bottom line, we spoke with Matt Meadows, Founder and CEO of WorkStory.
“For employers, the benefits of unlimited time off include fostering trust and autonomy, which can boost employee morale and retention, as well as reducing the administrative burden of tracking accrued leave.”
— Matt Meadows, Founder and Chief Executive Officer at WorkStory
That said, it can be a good idea to make sure that the entire organization knows that this concept has “buy-in” from all levels, and this is not a too-good-to-be-true-premise. “Having leadership set the example, as well as encourage PTO, can help to build confidence on this front.” Meadows states.
This ultimately leads to the purpose of having a policy in the first place. “It’s important to make sure that employees feel empowered to take time off without fear of judgment, as the lack of structure can sometimes result in fewer days taken,” Meadows explains.
According to the Harvard Business Review, offering benefits that support work-life balance can also improve diversity. Unlimited PTO has the potential to widen your applicant pool by appealing to groups that historically face work-life challenges, helping you find the most qualified candidates who may not otherwise apply. Below are a few other reasons why employers consider setting up UTO as a perk.
Reduced administrative burden
Tracking employee PTO can be incredibly time consuming and a source of frustration for business owners with a lot on their plates. Unlimited paid leave reduces the need for HR administrative work by:
- Eliminating accrued PTO hours based on time worked
- Combining sick leave, vacation hours, and other paid leave into one category
- Streamlining the PTO request process for all employees
- Improving communication between employees and managers
Enhanced employee satisfaction
Employees want flexibility and control over their schedules. After all, spending time away from work can reduce burnout, increase productivity, and support creativity for a more satisfying work experience. Encouraging staff to take breaks with unlimited PTO shows that you care about mental health and understand the importance of work-life balance, which can further boost employee morale.
Keep in mind
One caveat to unlimited PTO is that the employee’s work must be satisfactory, and their leave shouldn’t disrupt business. This can help motivate employees to stay on top of their responsibilities, support a more productive environment, and prevent an imbalance in work distribution.
Now that we know more about the potential upside to this policy, let’s find out more about what may give organizations pause before setting one up.
What are some potential downsides to unlimited PTO?
While unlimited PTO has its perks and may be a good solution for many businesses, it does come with some challenges. When proper guidelines or processes aren’t in place, it can lead to monitoring issues, employee abuse, and employer liability concerns.
Prevent unlimited PTO gray areas
To learn more, we spoke with Jonathan Feniak, General Counsel at LLC Attorney. “One of my clients started experimenting with unlimited PTO. It’s been an interesting shift for a company used to more traditional policies, and I’ve been working closely with leadership teams to ensure they implement it thoughtfully,” Feniak says. He emphasizes that while employees are likely to appreciate what a UTO policy brings to the table, it’s worth taking extra time to think through some details.
“What I’ve found is that unlimited PTO raises some legal gray areas that employers don’t always think about upfront. For example, if an employee leaves, how do you handle payout for unused time off when nothing’s tracked? It can get tricky, especially in states where PTO is considered earned wages. Be careful about crafting policies that address these nuances to avoid legal headaches down the line.”
— Jonathan Feniak, General Counsel, LLC Attorney
The point is that clear communication and solid documentation are key. Otherwise, the flexibility of unlimited PTO could lead to unintended problems.
Monitoring usage
Without a clear metric for unused vacation days or the number of hours each employee can take off work, it can be difficult to find a fair way to monitor the use of unlimited PTO. In some cases, this can raise questions about equity, favoritism, trust, and inconsistencies in approvals.
In one unlimited PTO policy example, an employee may feel their PTO request was unfairly denied when a coworker gets approval for those same days off. On the other hand, some employees may feel pressured not to take days off if they are in highly competitive roles. Without monitoring PTO usage, these workers may experience burnout or dissatisfaction.
Risk of employee abuse
One of the main concerns about unlimited paid leave is the potential for misuse. Employees could take advantage of the system by requesting an excessive number of days, thereby increasing the workload for other staff. However, a clearly defined policy can help business owners avoid these issues.
Employees not taking time off
On the flip side, you can end up with staffers who overthink using unlimited time off and fear taking it. To understand this phenomenon a bit more we spoke with Edward White, Head of Growth at Beehiiv, whose team recently implemented an unlmited time off program at their startup company. “We recently introduced unlimited PTO at Beehiiv as part of our larger efforts to create a workplace where people feel trusted and valued,” White says. “It’s still new for us, so we’re paying close attention to how it impacts both our team and our business growth.”
A surprising development has team members keeping the unlimited time off at arm’s length.
“One thing I’ve noticed is that some employees hesitate to take long breaks because they’re worried about disrupting momentum or looking less committed. At a startup like ours, where everyone is driven and results-oriented, this hesitation can lead to burnout instead of the rest they need. We’ve started emphasizing that PTO isn’t just a perk — it’s part of how we do our best work.”
— Edward White, Director of Growth at Beehiv
Despite this development, White shares that his team is already making strides with staffers to make this type of time off a valuable part of their work experience. “Encouraging open conversations about time off has helped, but it’s definitely something we’re still figuring out,” he says.
The takeaway being that like most organizational efforts, it makes sense to pay attention to outcomes, and what you can do to improve.
Financial implications and liability concerns
Allowing employees to take off as much time as they need can affect operations and your bottom line. You run the risk of not having enough employees to staff the business or complete required work. This can affect your business output and performance.
Also, while covering for coworkers who are using unlimited PTO, tired or overworked employees are more likely to make mistakes or suffer an injury due to:
- Exhaustion and fatigue
- Lack of concentration
- Impaired decision making
- Reduced motivation
How to implement unlimited PTO policies
If unlimited PTO sounds right for your business, your new policy should be carefully implemented. Focus on working out the details, creating a thought-out process, and educating your employees with these best practices.
Setting up the PTO request and approval process
Aim for a concise process that makes it easy for employees to request time off and for managers to review and approve PTO. Create a clear outline of the process, including:
- How to submit the request
- How long employees should expect before getting a response
- Where staff can view approvals
Establishing clear usage guidelines
If you don’t make the rules clear, staff who are unfamiliar with this type of vacation policy may think there are no restrictions. When establishing usage guidelines, things to consider include:
- Why unlimited PTO is being offered to employees
- How far in advance PTO should be requested
- Why and when a PTO request may be denied
- Length restrictions for each PTO period
- Whether there are minimum PTO hours each employee must take
- Who is eligible to use unlimited PTO benefits
Communicating the new policy to employees
You want your employees to understand how to use unlimited PTO with clear and simple steps. Here are some ideas to help your employees adapt to the new policy:
- Sharing policy guidelines during meetings and add a section to your employee handbook
- Posting the PTO request process in gathering areas
- Creating a digital FAQ guide for employees for quick reference
- Giving employees the opportunity to ask questions
- Prioritizing a company culture based on open communication
Reviewing your policy and making adjustments
At the end of the day, unlimited PTO only works if employees use it correctly, and the improved work-life balance helps the business thrive. Remember, the initial policy you create is not set in stone.
Listen to your employees, monitor usage, and review what is working and what is not. You can adjust the policy or process to better fit your organization and team. Just be sure to minimize changes and clearly communicate any adjustments.
Bottom line: Unlimited PTO has benefits for employees and employers
While unlimited PTO is a newer idea, small businesses can be more competitive, attract qualified candidates, and enhance work-life balance for current employees by adopting this type of vacation policy. However, proper implementation is key to its success.
If you need help managing a new PTO policy or other benefits, OnPay’s HR software makes it quick and easy for any business to streamline the process. From templated documents to PTO automation, OnPay offers the tools you need to stay organized and productive. Learn more about HR software for small businesses.
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.