Unlimited PTO: Trust, Liability, and the Boardroom Myth
The real reason companies love this "perk" has nothing to do with employee freedom.
I was recently told that an organization I used to work at was looking to axe unlimited paid time off. Why? A member of the board, with zero evidence, thought the policy was ripe for abuse.
It got me. Not because unlimited PTO is always a win. It isn’t. But because I have a hard time making decisions based on someone’s fear-mongering, which tells me much more about a leader than an employee.
How the Math Doesn’t Show
Unlimited PTO is sold as a recruiting benefit. The reality is, there’s usually an accounting reason companies are huge fans of it. A traditional PTO bucket with vacation and sick leave is recorded as a liability on the balance sheet. Let’s say 500 employees each have 10 days of unused PTO worth $200 a day. The company has a million-dollar liability sitting on the books that they cannot touch until someone leaves. Unlimited PTO erases it in an instant.
There’s also the payout issue to consider. If a departing employee walks out the door with three weeks of vacation banked, the company’s taking a financial hit just when they are incurring a lot of the other costs associated with turnover. Unlimited PTO by contrast has no “bank” to pay out. So while unlimited PTO is a sexy bullet point in a job posting, it’s also a benefit companies love because it helps them save money.
It’s Not All It Seems
Here’s the thing, in practice, unlimited PTO usually results in people taking less time off, not more. If people aren’t sure how much time off they are entitled to, many won’t take as much as they could or should. Some wait to see what their boss does. Others simply play it safe.
This leaves companies with a policy that seems good on paper but doesn’t always translate to reality.
The Data Tells the Real Story
The board member is wrong to fear abuse. The data is pretty clear here. Employees with unlimited PTO policies take an average of two more days off a year (16) than their counterparts with traditional policies (14). It’s not a radical shift. As organizational psychologist Caitlin Collins told Forbes, the vast majority of people are not abusing the benefit and just take a few days off here and there.
That’s also supported by Bippio’s survey of 1,200 workers that found employees with unlimited PTO put in a total of 54 hours more annually than their peers.
Unlimited PTO is a perk employees want, that’s for sure. Empower found 20% of employees would turn down a job without it. Still, most employers have not yet taken the plunge. Only 7% of employers offer it in SHRM’s 2024 survey. The great majority have a traditional set of vacation and sick leave buckets that are recorded on an accrual basis.
The Legal Caveat
Plus, for companies in the handful of states where labor is aggressively regulated, the accounting isn’t always so easy. California, for instance, has had a long and litigious history with “unlimited” PTO policies, where the courts have been willing to decide whether such policies are really unlimited or instead a de facto accrual system where employees have a “bank” of earned time.
If a policy is not truly unlimited, written and applied, then companies in places like California can be required to pay out an employee’s unused “bank” on termination.
The Starting Point
Netflix was one of the earliest pioneers of the policy. Hastings and Patty McCord launched a “no vacation policy” in 2003 predicated on trust and accountability. The idea was simple. Focus on results and stop caring about face time.
What helped was the culture reinforced it. Managers took time off and modeled it. Expectations and performance were clear. In short, trust was not created by the policy, but enabled by it.
The Real Point
When leaders talk about fears of abuse, of losing control and eliminating unlimited PTO, they miss the bigger point, which is not about PTO at all. It’s about trust. Not in employees but in leadership. It’s an admission that leaders don’t believe in their own people.
They don’t see that unlimited PTO can often work just as well for the company as for the employee. They don’t recognize that the real challenge is not abuse. The challenge is culture. Do managers model healthy time off? Do employees feel safe to use the benefit?
Unlimited PTO is a litmus test for high trust companies. It works in those companies. In a fear-based culture, it falls apart. The real abuse isn’t employees gaming the system. It’s in leaders stripping away benefits based on rumor, myth, and untested hunches.
The Real Benefit
Unlimited PTO is the canary in the coal mine. Is your organization led by fear or by trust? If the answer is fear, removing the policy will send a clear message to employees: we don’t trust you.
And once employees sense that, no benefit, unlimited or otherwise, will ever make up for it.
💬 Over to you: Does your organization offer unlimited PTO? If so, do people actually take it or does it feel like a perk that’s there on paper but not in practice?
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