Why you should be wary of the unlimited vacation perk

Summary
As unlimited PTO increases, workers are learning the right amount of time off depends on how good you are at your job, your company’s culture and whether you care what others think.Companies are squeezing every efficiency out of their teams. More of them now figure the least they can do is give employees “unlimited" paid time off.
Yeah, right.
“Unlimited PTO sounds great," says Karl Giese, who works in tech sales. “It’s complete B.S. because you’re afraid to use it."
The signs of efficiency are everywhere. Companies are laying off workers, calling people back to offices and cracking down on employee-handbook violations.
At the same time, unlimited PTO is growing. There is now no vacation cap at 7% of U.S. employers, according to human-resources trade group SHRM. That is a percentage point higher than when companies were throwing lavish pay and benefits packages at job candidates in 2022 and significantly more than the 1% of companies that had unlimited PTO in 2014.
Karl Giese says he didn’t take any vacation days last year, despite having unlimited PTO.
The rise of unlimited PTO brings up an important question about the amount of time off you can really take. Most often, it depends on how good you are at your job, your company’s culture and whether you care what others think. While a relatively small share of businesses offer unlimited PTO, the perk and how many workers feel about it is a mini referendum on the state of work-life balance.
Giese, 35 years old, didn’t take a single vacation day last year while working at a 15-person startup. He says the company’s small size and hustle culture made him feel like he couldn’t step away, never mind take as many days off as he wanted.
Some tech workers he knows at bigger companies curbed their days off to appear dedicated while the industry shed jobs. He says he quit near the end of the year and can afford to take a few months’ break before seeking a new role.
Unwritten rules
People with theoretically infinite vacation say their time-off requests remain subject to managers’ approval, a major caveat when planning around deadlines, holidays and the kids’ school breaks. And some workers say they feel judged by colleagues if they are out too often.
In certain cases, they see the perk as part of a corporate strategy to get tougher, not more lenient.
Phil Cutajar says a software company where he was a technical director lifted its cap on vacation days last year. Layoffs followed soon after. Evidence of the connection: People without vacation limits have no time-off banks to cash out when they leave.
Cutajar, 62, says he wasn’t laid off but recently left the company because he is financially independent and wants to write a book. He says open-ended vacation policies can put middle managers like him in a bind because there are no rules to cite if they want to reject time-off requests. He once approved a direct-report’s three-week trip to Japan because, well, he couldn’t come up with a reason not to.
It was more common, though, for employees to fear asking for too much.
“There is definitely some pressure with unlimited PTO not to overuse it, especially in the lower ranks," he says. He limited himself to three weeks of vacation, partly because he noticed other directors and executives didn’t take more than that.
Magic number
So, what’s the magic number of vacation days you can take without crossing an invisible line? It might be 16. That is the average number of days off taken by people who work for companies with unlimited PTO, according to a recent survey by financial-services firm Empower. A typical worker with finite vacation time takes 14 days off.
Heather O’Donnell takes five or six weeks off a year but says using her company’s unlimited PTO required breaking her old, workaholic habits.
Heather O’Donnell, an assistant merchant for a sporting-goods retailer with unlimited PTO, says she capped herself at about three weeks of vacation time in each of her first two years with the company. She wanted to prove herself and gauge how co-workers used the perk.
Lately she has taken five or six weeks of vacation a year without feeling guilt-tripped, but there is a trade-off. O’Donnell, 48, describes herself as a former workaholic with new priorities, including caring for her aging mother. If working less hinders her advancement, she’s OK with that.
“I’m not overly ambitious at this stage," she says. “It’s important to me to do my job well, but I’m not always going for that next promotion."
Many critics of unlimited PTO are looking at it wrong, says Patty McCord, who helped pioneer the idea in the early 2000s when she was Netflix’s chief talent officer. Yes, there is a benefit to the company, she says. No, it’s not all about employees’ well-being.
When employer and employee act in good faith, uncapped vacation time can be a win for both, McCord says.
“The point of PTO is to take it. For God’s sake, take that ski vacation at the end of January," she says.
Katrina Ghazarian, chief executive of human-resources consulting firm Gameday HR, says unlimited PTO works best with clear productivity benchmarks. For example, a sales representative who hits a quarterly goal early can feel comfortable taking an extended break, knowing the absence won’t be misconstrued as underperformance.
Human-resources consultant Katrina Ghazarian says unlimited PTO works best when companies set clear performance benchmarks.
In one case, though, she advised a client to ditch unlimited PTO. Employees in a survey said the freedom to set their own limits didn’t feel freeing after all.
“They hated it," Ghazarian says. “They felt this guilt if they took too much time off."
Write to Callum Borchers at callum.borchers@wsj.com