Unlimited PTO vs Accrued PTO: Differences, Pros and Cons

Unlimited PTO is one of the hottest new trends in employee benefits to emerge in recent years.

In studies from the late 2010s and early 2020s, unlimited PTO was found to be one of the highest valued employee benefits, with around 50% of US employees saying they’d prefer unlimited PTO to a higher salary.

In this article we’re going to look at whether or not unlimited PTO is the incredible benefit it’s cracked up to be, and how it compares to a more traditional accrual system of PTO.

We’ll finish up by giving some advice on how to craft your PTO policy in a way that maximizes upside and minimizes downside.

What is Unlimited PTO?

Unlimited PTO is a PTO policy with no set limit.

Instead of allowing employees a fixed quota of days or hours of PTO, they’re free to take time off when they need it (within reason – it’s not like employees are able to take months off at a time).

They’ll still likely need to apply for PTO ahead of time and their request for PTO will need to be approved, but people are not limited to a certain amount of time off.

What is Accrued PTO?

Accrued PTO is a system where employees earn PTO over time, and can only take as much time off as they have accumulated up to that point.

For example, employees might earn 1.5 days per month, or earn one hour of PTO for every 20 hours worked.

Over time, their PTO balance will grow, and when the person wants to take time off, they can apply for leave and the length of time will be deducted from their balance.

Learn more: What is the Average PTO Accrual Rate?

The Problem with Unlimited PTO

When we’re talking about unlimited PTO vs accrued PTO, it’s important to distinguish between unlimited PTO in theory, and unlimited PTO in reality.

As you can see by the studies we quoted earlier, workers love the idea of unlimited PTO. And why wouldn’t you? The idea that you can take time off whenever you need it, and not be limited to a few days off per year, sounds great.

But it typically doesn’t work out like this.

With no limit, there are no clear expectations on how much time off is a reasonable amount. Most people are so afraid that taking a lot of time off will negatively impact their performance that they rarely take time off at all.

Studies back this up, with the average number of vacation days taken in companies with unlimited PTO lower than the average for traditional PTO policies.

It can be a huge source of anxiety for employees, when they want to take time off, but they’re afraid of being seen as abusing their “unlimited” vacation policy.

Unlimited PTO can work, and there are companies that do it right, but you need effort, and just the right culture if it is to work.

Pros and Cons of Unlimited PTO vs Accruals

So now let’s break down the pros and cons.

Let’s look at the arguments for unlimited PTO, as well as a few reasons why traditional accrued PTO policies may work better.

The Case for Unlimited PTO

• Unlimited PTO, in theory, is super-flexible and employee-friendly.
• There can be less management required with unlimited PTO (no balances to track and update each time someone takes time off).
• There’s less financial liability for the business (as there’s no paying out of unused PTO).
• Unlimited PTO can be an enticing tool for hiring and retaining employees.

The Case Against Unlimited PTO (and for Accruals)

• Unlimited PTO can be extremely toxic for employees if not managed correctly.
• It still requires admin work (you’ll want to keep track of how much time off employees take, even though there’s no limit).
• Employees typically take less time off, leading to a higher risk of burnout.
• It may be trickier to comply with labor laws regarding PTO and payout of unused PTO with an unlimited PTO system.
• Accrued PTO is more clear, and easier for employees to quantify their benefits package.

Want an easy way to track how much PTO employees are using (whether you’re doing accrued or unlimited PTO), as well as making PTO requests, approvals and scheduling a breeze? Check out Flamingo, the simple PTO management app. It’s free to try, and saves your team hours of busywork per week.

Accrued vs Unlimited PTO: Which is Best?

There’s a lot of upside to unlimited PTO, and in theory, it sounds great.

Many companies that offer unlimited PTO do it in good faith, too. They don’t mean it as a trap. But unfortunately it rarely works out.

It’s just too vague, and the anxiety for employees over how much is “too much” is a massive downside (even if you always approve time off and never say anything negative about it).

In contrast, when there’s a set limit or quota, employees typically feel much more comfortable about taking time off, as they feel it’s something that they’ve earned, and have a right to take.

That’s why accrued PTO (or lump-sum, which in reality is just accrued PTO where you accrue time off each year) is the better option for most companies.

Alternative Flexible PTO Policies

If you want to offer a flexible PTO policy, yet you’re convinced that unlimited PTO has too many downsides, there are some alternatives to consider.

One option is a mandatory (or minimum) vacation policy. Buffer’s PTO policy is a great example of this. 

Instead of putting an upper limit on PTO, they put a lower limit, requiring employees to take at least three weeks (15 days) of time off per year.

It could be considered a type of unlimited PTO policy too, as employees are free to take more than the minimum (and generally PTO is encouraged, rather than discouraged or limited).

Another option is to go with unlimited PTO, but with a company-wide shutdown or holiday that gives employees no choice but to to take a certain amount of time off.

Ghost, for example, offers unlimited PTO, plus a two week period in December where the company is closed, meaning everyone takes two weeks off at the very least.

You could also set up an accrued PTO system, but allow employees’ balance to go into the negative.

This means, if someone has earned 10 days of PTO, but wants to take three weeks (15 days) off, they can do so. Their balance will drop to -5, and as they earn more time off it will eventually go back into the positive.

Finally, you could simply offer an above-market PTO accrual rate. Offering 25 days of PTO per year (or the equivalent monthly/weekly accrual rate), for example, would allow employees a lot of flexibility to take leave throughout the year, without the vagueness and ambiguity of unlimited PTO.

Final Thoughts

Unlimited PTO has gained a lot of buzz over the last few years, but many people are waking up to the difficulties of maintaining employees’ wellbeing on this type of system.

The initial fear many companies had with unlimited PTO was that people would take too much time off, but the reality is the opposite.

It’s difficult (not impossible, just difficult) to maintain an unlimited PTO system that doesn’t make employees feel guilty or afraid of taking time off.

Accrued or lump-sum PTO is much more clear, and much friendlier to employees (as long as you give enough PTO all up).

But that’s just our advice! Feel free to use whatever works best for you and your team.