How Open PTO Makes Life Better for Employees and Improves Productivity

Americans certainly work hard, but many of us play less than we might like—or is good for us. Although employees can accrue more time off as they spend more time with a company, the standard issue two weeks PTO remains a fact of life for millions.

In fact, the U.S. is the only advanced economy in the world that doesn’t guarantee employees any paid vacation. 

Compare this to countries like France, with 30 paid vacation days per year, or Australia with 20 paid vacation days, and it’s easy to see how the U.S. earned the nickname “The No Vacation Nation.” To make it worse, 54 percent of Americans don’t even take the full amount of their vacation time.

Overwork is a problem

The tendency for Americans to overwork has negative consequences for both employees and employers. Work-related stress has been linked to serious health risks. A recent study estimated the effects of workplace stress are similar to those of secondhand smoke. The effect of working long hours in particular was an estimated 20% increase in mortality.

Despite the commonly held belief that working more hours leads to “more stuff getting done”, overwork negatively impacts productivity as well. One recent study showed that managers could not tell the difference between employees who worked extra hours, and those who simply pretended to. And overwork can lead to decreased work performance, more mistakes and absenteeism.

Open PTO is a potential solution

So what are employers to do to address this issue? How can employers provide sufficient paid time off (PTO) while ensuring work gets done? A solution some companies are pursuing is open PTO—putting no cap on the number of vacation or sick days an employee can take off per year.

Currently, only one to two percent of companies offer open PTO. Many of the companies offering this benefit are in the tech industry, such as Netflix, Hubspot and Dropbox. However, other companies are jumping on board as well—General Electric and Grant Thornton (an audit, tax and advisory firm) recently began offering open PTO.

This may sound radical and it’s reasonable for employers to fear that this non-traditional leave policy could lead to abuse. Will employees take half the year off? Will company productivity plummet? It turns out that under open PTO policies, employees often take less time off than under traditional PTO policies, potentially due to feelings of guilt or internal company competition. So the risk may be that they are even more prone to overwork than before!

Time off only helps when you take it

In order to reap the health and productivity benefits of employees taking more time off, companies should go beyond simply offering open PTO, and encourage employees to use it. Top executives within a company can set the example. For example, Reed Hastings, Netflix CEO, has been vocal about taking 6 weeks of vacation time a year, and he insists that his employees should make use of the policy.

Two years ago, Indeed took the leap of offering open PTO, and has seen striking results. Some of the outcomes include:

  • Over 20 percent year-over-year increase in vacation days taken by  employees.
  • A 30 percent increase in vacation day use in the US alone.
  • An extremely productive 2017 with record company growth.
  • Low attrition and high engagement.

Open PTO as a recruiting differentiator

Indeed chief economist Jed Kolko notes that as wage growth has accelerated, this has upped the ante for employers in an already tight labor market. Companies should consider other avenues beyond wage increases and common benefits like health care to remain attractive to job seekers.

An open PTO policy provides employers with a unique advantage that can significantly impact talent attraction and retention. Here are some of the ways that open PTO can help attract talent and increase productivity:

  • Attract Millennials – Millennials tend to stay longer at jobs that offer flexibility than those that don’t.
  • Improve and speed up hiring process – Employees love open PTO, not only for the opportunity to take more time off, but also because it enables them to achieve a better work/life balance.
  • Show you treat employees as adults – Open PTO increases trust between employees and employers by demonstrating employees are free to manage their time and meet productivity goals on their own schedule.

Every firm needs to make its own decisions about what is best for them, and some may not feel comfortable offering open PTO to employees. But for those firms that choose an open PTO strategy, it can truly be a game changer, increasing productivity company-wide, improving employee morale, and helping to attract and retain talent.

Paul Wolfe is SVP of Human Resources at Indeed

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