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How to Build an Unlimited Vacation Policy That Fits Your Team Unlimited PTO policies often seem risky -- but not for the reason you think.

By Tony Tie Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.


In 2015, Americans passed up a whopping 658 million vacation days, costing the U.S. economy $223 billion. That kind of statistic represents a lot of pressure for CEOs to figure out how to get their employees to take more time off.

Related: Why My Company Approved Unlimited Vacation Time for Our Team

Offering unlimited paid time off (PTO) may seem like the ideal solution. Who among us wouldn't love having the freedom to take time when we need it, or having the time necessary to finally go on that dream trip?

According to the State of American Vacation 2016 report, however, only 1 percent of American companies have unlimited PTO policies. CEOs are hesitant, worried that employees will abuse the perk. Yet, in fact, just the opposite is actually true: Unlimited vacation results in employees taking less time off than they would with traditional policies.

Some employees might avoid taking time off for fear of losing their jobs or falling behind in their workloads. Others might not be comfortable taking a vacation that wasn't specifically given to them. Reasons aside, employers have a very good reason to want employees to take breaks: Time off boosts creativity, productivity and morale. In other words, Americans might have worked millions of extra days, but that doesn't mean they accomplished more.

A unique team requires a unique PTO policy.

CEOs are left to wonder whether unlimited vacation is a workable solution. Company leaders want productive, happy employees, and unlimited vacation hasn't proven it can consistently provide that. But you shouldn't be concerned whether unlimited PTO works in general. What matters is whether it works for your employees. And only you can determine that.

Related: Unlimited Paid Vacation: 'Jedi Mind Trick' or Good Policy?

Unlimited PTO can work for your company if you craft a policy designed specifically for your employees. If you've been toying with the idea, here are three tips to get you thinking:

1. Hire smarter. Unlimited vacation works best for companies with employees who will neither waste nor abuse the policy, but finding that sweet spot can be tough.

Let's say yours is just this kind of company: You already have a strong team with employees exhibiting the qualities you want. So, take action: Encourage those employees to refer candidates for open positions. Glassdoor, for instance, found that interviews from employee referrals increase the odds of successful job matches by up to 6.6 percent.

Incentivize those referrals with rewards or bonuses if the candidate is hired. Your employees are valuable assets; use their skills and knowledge to help you grow.

When you're interviewing a candidate, make sure you're testing for employees who are self-reliant and proactive. These are the people who will work best under an unlimited vacation policy. Give these candidates a task related to the work they'd be doing in the open position, or throw them an unexpected question to see how they tackle a problem.

If they're not taking initiative in the interview, they likely won't in the role, and they may not work well with an unlimited vacation plan.

2. Give your employees a little nudge. According to a report by the U.S. Travel Association, 67 percent of employees surveyed said their employers didn't speak openly about the importance of taking vacation. But, as company leader, you have more control than you might think over how employees respond to unlimited vacation. Employees' anxiety about getting behind or losing their jobs will hardly be a problem if the company leader actively works to assuage those fears.

If it's been a while since an employee took some time off, check in with him or her at your next one-on-one meeting. Give reminders about the policy, and if employees seem wary of leaving uncompleted projects behind, help them connect with others who can help.

Also, if your budget allows, consider offering rewards for taking time off. Gusto, for instance, buys its employees a plane ticket on their first work anniversary. They can go anywhere in the world, but that ticket expires a year from when it's issued, making sure employees have an incentive to get away. Sometimes, a gentle nudge is all an employee needs to know it's okay to take that trip.

3. Remember: You're not married to your vacation policy. Even after reminders and rewards, some companies will still have trouble getting employees to take PTO. According to The Creative Group, although 21 percent of employees surveyed agreed that they'd be more productive if they took more vacation, 56 percent believed that even if their companies offered unlimited PTO, they wouldn't use any more vacation days than they already do.

At this point, ask your employees what they like and dislike about the policy. You'll quickly find aspects to tweak by giving your people a voice. Even more important, is unlimited vacation something your employees even want? It might not be. And if the policy doesn't work for your employees, what's the point of having it?

When "take the time you need" stops benefiting your employees, it's time to start exploring alternatives. SC Johnson helps its employees achieve a stronger work-life balance with personal concierge services, and more companies are joining Purina in allowing employees to bring pets to work. You can still give employees the breaks they need to be better teammates, even without unlimited PTO. You just have to get creative.

Related: Here's Why Every Employee Should Have Unlimited Vacation Days

Vacation policies don't fit into a one-size-fits-all formula. Look to your own employees and values to see how unlimited vacation can benefit your people. And even if it isn't the right fit for your company, you can still create alternatives that grant employees a breather without creating anxiety about underperforming. By implementing people-centric perks that benefit your employees, you'll ensure your company maximizes both its productivity and team morale.

Tony Tie

Senior Marketer, Expedia

Tony Tie is a “numbers-obsessed” marketer, life hacker and public speaker who has helped various Fortune 500 companies grow their online presence. He is also a marketing and entrepreneurship lecturer at various universities.

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