“You get unlimited PTO? Ha! Don’t you know that is just another corporate trick?”

This is the kind of sentiment that has bubbled up in popular culture in recent years regarding unlimited PTO policies. Perhaps this is due in part to the fact that this type of policy is not yet widely available to many employees. Data shows that only 12% of employers currently offer unlimited PTO, but an additional 16% say that they are considering doing so in the coming years. Therefore, it is important to understand the reality of unlimited PTO policies and what they can truly offer to you. What you will find is that the prevailing sentiment that they are simply a corporate trick isn’t quite right. We will take a look at examples, use cases, and the reasons why many people who do have this benefit don’t use it to the best of their ability. 

Where the “Unlimited PTO Is a Scam” Argument Comes From

On its face, it seems odd that there might be such a strong argument against a policy that seems like an ideal benefit for employees. So, where does the “unlimited PTO is a scam” argument come from?

Argument 1: People with Unlimited PTO Take Fewer Vacation Days

This argument appears to have emerged from a single 2018 Namely study that found that employees who were offered unlimited PTO only took 13 days of vacation per year compared to the 15 days per year enjoyed by those who did not have unlimited PTO. 

Once those results went public, the argument against unlimited PTO gained traction with many claiming that unlimited PTO is a scam.

The underutilization critique ignores that traditional PTO suffers from similar problems. WorldatWork research found that only 51% of employees use all their accrued PTO. The Harris poll found that even more Americans (78%) do not use the maximum amount of paid time off allowed by their employer, regardless of the type of PTO.

The real culprit isn’t PTO unlimited or traditional; it’s American work culture.

However, this may be shifting. New data show that those offered unlimited PTO are now using just as much, if not more, time than those without it. 

Why We Don’t Buy This Argument:

It seems that a big part of the initial problem with unlimited PTO plans was confusion and misunderstanding about how they were intended to be used. Employees wondered how much time off was truly acceptable under such a plan, and many employees preferred to undershoot what they could do rather than overshoot. Thus, initially, employees took fewer days when offered an unlimited plan. That has now changed. 

According to a 2024 SHRM research study, employees offered unlimited PTO now take an average of 16 days off, compared to 14 days off for those offered a traditional plan. Similarly, Expedia’s 2023 Vacation Deprivation Report found that companies with Unlimited PTO take a full week of PTO more than their counterparts.

With this more recent research, we can safely say that the myth of unlimited PTO being a corporate scam to discourage time off is less compelling.

Argument 2: It’s just a way for companies to save money by not paying out PTO

This argument comes from the fact that Companies offering unlimited or untracked PTO typically do not pay out employees’ unused PTO upon termination. This may feel like a “gotcha” to employees, but it is important to know that most states do NOT require employers to pay out any unused PTO. 

In fact, very few states do require that companies pay out unused PTO, as found below:

States where PTO Payout is Required

• California PTO Payout Law – PTO must be paid out upon termination
• Colorado PTO Payout Law – PTO must be paid out upon termination
• Illinois PTO Payout Law – PTO must be paid out upon termination
• Indiana PTO Payout Law – PTO must be paid out upon termination
• Louisiana PTO Payout Law – PTO must be paid out upon termination
• Maine PTO Payout Law – PTO must be paid out upon termination
• Massachusetts PTO Payout Law – PTO must be paid out upon termination
• Montana PTO Payout Law – PTO must be paid out upon termination
• Nebraska PTO Payout Law – PTO must be paid out upon termination
• North Dakota PTO Payout Law – PTO must be paid out upon termination
• Rhode Island PTO Payout Law – PTO must be paid out upon termination if the employee has been employed for at least 1 year

Note: Other states may require PTO to be paid out unless specified in the employment contract or the Company’s policies.

Why We Don’t Buy This Argument:

Given that most states do not require PTO to be paid out, the argument that companies offer untracked PTO to save money is moot in most states, except those listed above.

Argument 3: It’s not Really Unlimited

Another argument for unlimited PTO being a scam is that it is not truly unlimited. While this is a nuanced argument, it suggests that naming matters and that calling the policy “untracked PTO” may be more appropriate. The concern with calling this policy unlimited PTO is that it is not truly unlimited, and PTO must still be approved by the manager.

Why We Don’t Buy This Argument

While we believe that “untracked PTO” is a better name than “unlimited PTO”, we don’t believe this is a real argument, as any reasonable person would not expect to be able to take off a year from a job. In the right companies with the right manager and culture, though, it is reasonable to expect that managers simply hold employees accountable for their results, rather than their time in the office.

The Real Culprit: Culture and Management

The true reason why some unlimited PTO policies are not the smashing success that they otherwise could be is that there are cultural and management factors that hold employees back from reaching their full potential with these plans. 

In America, there is a great cultural PTO paradox. This is the fact that most Americans will tell you that they want and need more time off of work, but then they don’t take that time when it is offered to them. It appears that there are some cultural constraints holding them back and making them feel as though taking the time that they are offered would somehow result in them looking less than willing to do the work that they are assigned. 

Meanwhile, many millennials feel more pressure than relief when they learn that their company offers unlimited PTO. These individuals are trying to work on making a name for themselves within the company that they work for, and it is incredibly hard to do that successfully when they are actively concerned that taking time off will make them look like they aren’t a team player. As such, many simply ignore the policy and take even less time than they would if they were given a set standard amount of PTO instead. 

However, it should also be noted that a “use it or lose it” policy for PTO doesn’t work much better for employees or employers either. Instead, such policies also put time constraints and pressures on employees that they wouldn’t otherwise have. The pressure can mean that they simply don’t take any time at all as choosing when to do so can lead them into a state of not wanting to make any type of choice at all. 

So Is Unlimited PTO a Scam? What we Think:

It is unfair to say that unlimited PTO is a scam. What is fair to say is that unlimited PTO policies are not guaranteed to work. The difference between those policies that work and those that don’t tends to boil down to how effectively the plan is communicated to employees. Bamboo HR explains: 

Depending on the uptake of unlimited PTO policies by companies, societal norms about vacation days and work could change. Consider the impact home working during the pandemic had, and how that has shifted the landscape of the office today. It could lead workers to further prioritize their work-life balance and flexibility, as has been the trend in many places.

In other words, norms are changing, and companies should explain that they are keeping up with the times by offering an unlimited PTO plan and encouraging employees to use it.  Like most policies, clear guidelines and communicating expectations around paid time off will be key in driving this policy’s success. As the majority of challenges that arose from the idea of unlimited PTO when it was first introduced were related to the ambiguity of what was a novel approach originally.

With that in mind, implementing an unlimited PTO plan can be the way to go, it is just important to recognize that such a plan can have downsides if it is not properly implemented from the start.