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Why nobody actually takes unlimited PTO (and what to do instead)

Every few months, another company announces unlimited PTO. The pitch is always the same: trust your employees, treat them like adults, let them take the time they need. It sounds progressive. It sounds generous.

The data tells a different story. Namely (2018) analyzed HR data across their client base and found employees with unlimited PTO took an average of 13 days off per year. Employees with traditional fixed plans took 15 days. Two fewer days of vacation under the policy marketed as unlimited freedom.

Namely's 2022 follow-up showed the gap narrowing slightly: 12.09 days for unlimited versus 11.36 for limited. But look at what happened. Everyone started taking less time off. The "generous" policy wasn't making anyone more rested.

Ben Eubanks, Chief Research Officer at Lighthouse Research & Advisory, put it bluntly in their report "Biased, Burdensome, and Burnt Out": the decision to adopt unlimited leave is frequently made for employer convenience, not employee benefit. The companies adopting these policies often have cultures that discourage taking time off, whether they realize it or not.

Unlimited PTO is a policy that mostly benefits employers. Here's how.

The accounting incentive nobody talks about

Under accounting standards like FASB ASC 710 and IAS 19, employers must record a liability when employees earn vacation time that vests or accumulates. Traditional PTO creates this liability. Every year, employees accrue days. Every year, the company records what it owes them.

Unlimited PTO eliminates this entirely. No specific days earned. No accumulation. No liability. Nothing on the books.

Run the math. A 200-person company. Average salary of $80,000 or €75,000. Employees accrue 20 days annually. That's close to a million in vacation liability that disappears under an unlimited policy.

CFOs care about this. Investors care about this. Clean balance sheets matter during fundraising, during due diligence, before an IPO. Unlimited PTO solves an accounting problem while earning praise for being employee-friendly.

In jurisdictions where earned vacation must be paid out on termination, unlimited PTO sidesteps this too. No accrued balance means no payout. PwC's accounting guides on compensated absences explain exactly how this works.

The blog posts pitching unlimited PTO never mention this. It's always about trust and culture. Never about the line item that vanishes.

Why people don't take the time

When you have 25 vacation days, you know where you stand. The number is concrete. When you have "unlimited," there's nothing to anchor to. Thaler and Sunstein (2008) established in Nudge that people facing decisions without clear defaults tend toward the most conservative option. The organ donation research makes it vivid: countries with opt-out defaults see 85-90% enrollment; opt-in countries see around 15%. The default shapes behavior more than stated policy.

Unlimited PTO has no default. Employees look to peers and managers for cues. If the CEO took 8 days last year, that's the implicit ceiling. If your team lead checks Slack during her "vacation," that's the new normal. Nobody wants to be the person who takes the most time off.

A 2022 peer-reviewed study in PMC, titled "Unlimited Paid Time Off Policies: Unlocking the Best and Unleashing the Beast," identified a shift in power dynamics. With fixed PTO, you're spending something you already own. With unlimited, you're requesting permission. Every time. Vacation becomes asking for a favor rather than using an entitlement.

A Fortune/Harris Poll (2023) found nearly 80% of workers feel guilty taking PTO. Combine that guilt with the ambiguity of unlimited policies and you have a system designed to suppress usage. CharlieHR, a UK HR software company, rolled back their unlimited policy after employees took less time and reported increased anxiety. A Joblist survey found 43% of workers believe unlimited vacation policies are a scam.

Unlimited PTO transfers the psychological burden of deciding "how much is OK" from employer to employee. The employer gets credit for generosity. The employee gets anxiety.

The companies that walked it back

Kickstarter dropped unlimited PTO in September 2015. They had about 100 employees. Fast Company and CNN Money both covered it. Their spokesperson said setting specific parameters removed the question of "how much is appropriate." Employees were taking less time, not more. They landed on 25 days.

CharlieHR in the UK followed a similar path, citing confusion and burnout as reasons for reversing course.

These rollbacks don't make many headlines. Companies don't want the PR hit of "taking away" a benefit. But the pattern is consistent: unlimited PTO creates ambiguity, ambiguity reduces usage, reduced usage leads to burnout, burnout forces policy change.

Microsoft announced "Discretionary Time Off" in 2023, moving the opposite direction. But Microsoft has thousands of HR professionals and robust management training. If you're running a 50-person company, their playbook doesn't apply.

Where statutory minimums change the equation

Unlimited PTO thrives where vacation entitlements aren't legally protected. The EU Working Time Directive mandates 20 paid vacation days minimum for all member states. The UK requires 28. Australia guarantees 20. These floors change the psychology entirely.

In countries with statutory minimums, "unlimited" means something different. You'd still get your legal minimum regardless of what your employer calls the policy. The ambiguity that suppresses usage elsewhere gets bounded by law.

Where no such floor exists, "unlimited" fills a vacuum. Employees in those contexts are more likely to worry about "abusing" an unlimited policy, according to Skynova research. That's not conscientiousness. That's a work culture that treats rest as something earned rather than something owed.

Unlimited PTO doesn't fix culture. It outsources the problem to individual employees.

What actually works

Start with a generous floor. Twenty-five days minimum. This sets the anchor. Kickstarter landed at 25 after dropping unlimited. That number means something. "Unlimited" means nothing.

If you insist on keeping "unlimited" for marketing reasons, add a mandatory minimum. Buffer requires 15 days. HubSpot mandates two weeks. Kik required one week every four months. The minimum becomes the anchor. People take more than the minimum when the minimum is reasonable and enforced.

Skip use-it-or-lose-it. It creates a year-end rush and breeds resentment. Set a carryover cap instead: carry up to 5 days into the next year, then they expire. Flexibility without ballooning liabilities.

Build nudges into your process. Thaler and Sunstein's choice architecture applies directly. If managers get a prompt when someone hasn't taken time off in 8 weeks, usage goes up. Tools like InvisibleHR can automate this without requiring new policies.

Publish usage data. Share anonymized team-level PTO statistics quarterly. When people see the average is 22 days, they calibrate. Anchoring works both directions.

The bottom line

Unlimited PTO shifts risk and cognitive burden to employees while saving employers money. Namely's data shows it reduces vacation usage in most implementations. The psychology is understood: ambiguity plus guilt plus social comparison equals less rest.

If you're considering unlimited PTO: don't. Pick a generous fixed number, set a floor, build norms around taking it. If you already have unlimited PTO: add a mandatory minimum today and start tracking usage. The policy isn't working how you think it is.

The most generous vacation policy is the one people actually use.

References

  1. Namely (2018). "Does Your PTO Plan Type Even Really Matter?" HR analytics report. namely.com
  2. Namely (2022). "Namely Research Examines the State of Unlimited Paid Time Off." globenewswire.com
  3. Eubanks, B. Lighthouse Research & Advisory. "Biased, Burdensome, and Burnt Out: The Unlimited PTO Story." lhra.io
  4. Thaler, R.H. & Sunstein, C.R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University Press.
  5. Financial Accounting Standards Board. ASC 710-10-25-1, Compensated Absences.
  6. International Accounting Standards Board. IAS 19, Employee Benefits.
  7. PwC. "Compensated absences under ASC 710." viewpoint.pwc.com
  8. Fast Company (2015). "Kickstarter Nixes Unlimited Vacation Time For Employees." fastcompany.com
  9. CNN Money (2015). "Kickstarter nixes its 'flexible' vacation policy." money.cnn.com
  10. PMC (2022). "Unlimited Paid Time Off Policies: Unlocking the Best and Unleashing the Beast." pmc.ncbi.nlm.nih.gov
  11. Fortune/Harris Poll (2023). "Nearly 80% of workers feel guilty taking PTO." fortune.com
  12. Joblist. "Are Unlimited Vacation Policies a Luxury or a Lie?" joblist.com
  13. Buffer. "Minimum Vacation Policy." buffer.com
  14. Skynova. Research on unused vacation days and unlimited PTO attitudes.
  15. European Union. Working Time Directive, minimum 20 days paid annual leave.