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There is No Such Thing as a Free Lunch or Unlimited PTO

Game Theory, HR Practice, The Work/Life Balance Myth

As an HR professional, I could never understand the Unlimited PTO as a benefit. Yes. I think companies are acting in act in good faith, but can we rely on faith in the corporate rat race?

According to the World Population Review, the United States ranks in the top ten hardest-working countries in the world.

"The United States was the seventh-hardest-working country in the world in 2021. The U.S. worker averaged 1,791 hours, just below Poland. Unlike their European counterparts, American workers are not guaranteed paid sick leave or paid maternity leave. Workers in the mining and logging industries work the longest hours in the U.S., often averaging 44 hours per week or more."

Let's take a Deep Dive into Unlimited PTO

The Positives

  • HR would not have to spend man hours collecting data and calling the payroll service to correct an employee's accrual - again.

  • It is an effective recruiting tool

  • It stops employees from complaining that their PTO is wrong, and it seems to make employees happy.

Why is this such a Company win?

  • Accrued PTO is no longer a financial liability (line item). Hence, profitability is better.

  • The Company looks financially better if a Buyer is interested.

  • When employees leave, there is no accrued PTO to pay out.

  • If the Company is looking for a loan, financials look healthier.

Operational Example

  • Workhorse Employee, Ella Shipping, doesn't take PTO. She is paid her regular salary.

  • Lazy Maisy takes 3 months of unlimited PTO.

  • Lazy Maisy is paid the same as Ella Shipping.

  • Ms. Shipping is not "banking" time that could be paid out later. (*Depending on federal and state laws.)

As an employee, would you rather accrue or roll the dice with unlimited PTO?

How Can This Work?

  1. How is the company going to be financially viable? If every employee has unlimited PTO, what is to stop people from taking six months off? (If any requirements are put on the benefit - it becomes Limited PTO.)

  2. Do they still receive health benefits if they are gone?

  3. What is their seniority? Perhaps, the employee started in 2020, but only worked a total of one year, Do you they now have the perks of being a 4-year employee?

  4. What about the dedicated workhorse employee who picks up all the slack?

Who controls Unlimited PTO?

  • How do you design a fair unlimited PTO policy? Is it the underperforming middle manager who is afraid his employees will be condemned on the next 360 reviews because he didn't approve PTO?

Corporate Urban Legend 211:

We all know the story of the Absent CEO who was always training for some Iron Man Marathon in a different state. The only thing he built up was a gold-medal level of endurance for consuming insane amounts illicit drugs and calling his HR Lady at 1 am paranoid that his middle managers were staging a coup to overthrow his car.

Let's Talk Science

Tragedy of Commons

"Baseline: All employees want, in theory, to take as much vacation as possible. But, they also all want to take just slightly less vacation than each other. to be perceived as more loyal, more committed, and more dedicated, (hence more promotion-worthy) Everyone looks to the others for the baseline and will take just slightly less than that. People will take less vacation because they don't want to seem like that person who's taking the vacation days It's a race to the bottom. Brian Christian and Tom Griffiths, Algorithms to Live By.

Pop Culture Example

Take NBC's show, The Traitors for example. The premise is to gather 20-plus contestants, choose 3 traitors from the 20, and then fight to the virtual death to win $250,000.

The overwhelming strategy of the chosen "traitors" is to blend in, be non-committal, follow the herd, but slowly cross the line to take more information than the others. Sound like The Tragedy of the Commons? You decide.

Side Note: I love host, Alan Cumming. More accurately, I love his image. I don't know the man. However, his image is too fabulous. From his wardrobe, dramatic entrances, sly humor, and witty banter, Mr. Cumming is the gold standard.

Let's Talk Sociology

Short Definition Sociology: The study of social causes, human behavior in groups, and how people interact.

"Why We Often Pay Too Much When We Pay Nothing"

In this case, substitute "Free" with "Unlimited".

"The critical issue arises when FREE! becomes a struggle between a free item and another item." In our case, the struggle is between unlimited PTO and operationally profitable business.

"What is it about Free (Unlimited) that's so enticing? Why do we have an irrational urge to jump for the Free item?" According to Dan Ariely, author of Predictably Irrational, he proposes that humans are intrinsically afraid of loss. The real allure of Free is tied to this fear. There is no viable possibility of loss when we choose a Free item. But suppose we choose the themes that are not free - uh-oh, now there's a risk of having made a poor decision - the possibility of a loss. And so, given the choice, we go for what is free."

How many times have you downloaded that Free Recruitment survey, just to be on the never-ending cycle of newsletters?

What does this mean?

"We get excited when something is Free and that consequently, we can make decisions that are not in our best interest. " Dan Ariely, Predictably Irrational


What does this mean for us as workers and employers?

Employers are selecting candidates that will abuse unlimited PTO because it is a recruitment tool?

As employees are we choosing the nickel over the dime because the nickel looks bigger?

You decide. Let me know your thoughts. I am learning too.




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