Want a Job With Unlimited PTO? It Could Cost You Financially

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Unlimited PTO sounds great, but it could cost you money and time off. Find out how unlimited time off really works and how to make the most of it. 

When you land a job with unlimited paid time off (PTO), you might expect to rack up more passport stamps. Or at the very least, you won’t have to worry about running out of sick days.

But here’s the truth about unlimited PTO policies: it’s often employers who reap the financial benefits, not employees. In fact, unlimited vacation time could end up costing you money and doesn’t always translate to more time off.

How unlimited PTO works

Unlimited paid time off (PTO) has become a coveted benefit. A 2019 MetLife study found that 72% of employees said an unlimited PTO policy was the workplace perk that interested them the most.

But as you’ve probably guessed, “unlimited” PTO doesn’t really mean unlimited. It means that there’s no official cap on the number of vacation and sick days you can take. Unofficially, though, many companies that tout this benefit still have a cap of three to six weeks.

In a lot of respects, unlimited PTO can look a lot like traditional PTO. You’ll probably have to request time off. Your time off will likely be tracked. And your manager can still deny your request, particularly if they’re concerned about performance or the team is overloaded with work.

One of the big issues with unlimited PTO is the lack of clarity. Let’s say you work for a company that gives employees 15 days of PTO each year. You know you’ve earned 15 days off and that your coworkers are entitled to the same amount. Your boss also knows that you’re owed this time.

But with unlimited PTO, you may not be sure how much time other people are taking. You may also not feel pressure to take time off because, hey, you can take it at any time. Several studies have found that employees with unlimited PTO wind up taking less time off than those with traditional PTO. And keep in mind that 46% of Americans who get traditional PTO are already leaving unused days on the table each year.

How unlimited PTO can cost you money

Another pitfall for employees happens when they leave their jobs. In many states, employers are required to pay workers for unused vacation time if they quit or are terminated. Even if state law doesn’t require employers to pay out unused time off, some companies state in their employment contracts that they’ll do so.

When a company is required to pay workers for unused vacation days or they’ve agreed to do so in a contract, the cash that would be needed to pay for those days off would be recorded on their balance sheet as a liability.

If you have unlimited vacation days, though, it’s unlikely you’ll get any payout should you get fired or quit your job. Even if you’ve worked the entire year without taking time off, there’s no obligation for your employer to pay you for the time you didn’t take. This has the potential to negatively impact your personal finances while between jobs. By some estimates, companies can wipe away billions of dollars of liabilities by simply switching to an unlimited PTO policy. That means more money in the company’s pocket, and less in yours.

Should you take a job with unlimited PTO?

Unlimited PTO can be a fabulous benefit if your company values work/life balance, you have a good relationship with your manager, and you’ll actually take advantage.

If you’re weighing a job offer with unlimited PTO, don’t assume you’ll be allowed to sail off to some tropical island with two days’ notice. Ask your recruiter how much time the average employee takes and how much time would be considered too much. Also ask about the process for requesting time off, including how much notice is required.

Should you accept the job, be sure you don’t snooze on this benefit. Just like the salary you negotiated, it’s part of your compensation package. Even if you’re planning for a longer vacation later on, try scheduling at least a couple of days off periodically throughout the year. Delay too long, and you may never get the time off you’ve worked so hard to earn.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Robin Hartill, CFP® has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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