The concept of unlimited paid time off (UPTO) has been a topic of discussion in workplace conversations since the early 2000s. What began as a bold alternative to rigid vacation policies — initially championed by startups and tech firms — quickly became a symbol of modern workplace culture. Over the years, it has gained traction, sparked debates and prompted a steady stream of HR think pieces, all attempting to determine whether the promise of autonomy materializes in practice. While some organizations have adopted it to attract talent and simplify administration, others have questioned whether it is genuinely beneficial or just good optics. 

UPTO policies sound generous and progressive, offering employees the freedom to take time off as needed, without a formal cap. In practice, a truly unlimited PTO plan removes accruals altogether. There is no balance to track, no carryover into the new year and typically, no payout at separation.

Employees are trusted to take time off as needed, provided business needs are met. These policies often merge all leave types (vacation, sick, personal) into a single, flexible benefit. And while “unlimited” sounds absolute, most employers still impose boundaries around extended leaves and require manager approval. So, while “unlimited” PTO may be untracked, it is not without rules, and employees are usually very aware of the boundaries.

A Look Back: Growth, Hype and Now a Plateau

The early 2010s marked a sharp rise in organizations experimenting with UPTO, particularly in high-growth industries like tech and finance. According to Employers Council’s 2018 survey, there was a 25% increase in organizations offering UPTO between 2016 and 2018.

Fast forward to 2024, and the trend appears to be cooling. Only 7% of U.S. employers currently offer UPTO, down from 8.8% of job postings in 2022. Some organizations are reversing course, moving back to structured and limited policies in response to employee confusion, administrative headaches, compliance concerns and evolving state leave laws.

Do Employees Take More Time Off?

A central fear among employers offering UPTO has always been overuse. The data tells a different story.

• Cloud-Based HR Platform Namely’s 2017 HR Mythbusters Report: Employees with UPTO took an average of 13 days off, compared to 15 days for employees with capped vacation.
• Empower Financial Services’ 2024 Research: UPTO employees took 16 days off, only slightly more than the 14-day average in traditional plans.

Cultural factors — such as fear of judgment or concerns about workload — seem to outweigh policy generosity. Many employees underuse the benefit, often feeling guilty for taking time off or unsure about what is “acceptable.” Nearly 70% of employees admitted to working during vacation, and half check email regularly while away.

Despite its shortcomings, UPTO remains a top-ranked benefit. Empower reports that:

• 43% of employees believe every organization should offer UPTO.
• 26% would consider a lower-paying job if it came with UPTO.
• 19% would not accept a new job unless this benefit was offered.

Employees are drawn to the perception of autonomy, flexibility and trust, even if the policy itself does not result in employees taking significantly more time off.

Legal and Compliance Hurdles: The Catch

What seemed like a simple swap — ditch accruals and hand employees the keys to their calendars — has proven to be anything but simple. The legal landscape has become increasingly complex, and employers must exercise caution.

1. State and Local Sick Leave Laws
   States like Colorado, California and New Mexico require employers to provide a defined number of paid sick leave hours, with specific conditions for documentation. These state sick leave laws also provide protection against retaliation. Broad UPTO policies often lack the structure to ensure compliance, particularly when tracking the reason for time off is avoided or discouraged. Broad UPTO policies may suggest to employees that all time off is protected by state sick leave laws.
2. FMLA and ADA Considerations
   Unlimited PTO policies may unintentionally convert unpaid FMLA or ADA-protected leave into paid leave, exposing employers to legal risk if not applied consistently. To reduce liability, employers should clearly separate unlimited vacation from medical leave and maintain distinct policies for FMLA, ADA and state sick leave compliance.
3. Wage and Hour Risks
   Though courts have not definitively ruled on whether an “unlimited” model fully protects against claims for unpaid leave upon separation, states like Colorado treat accrued vacation as earned wages. Employers converting to UPTO need a clear plan to handle existing balances. Since the Colorado Wage Act prohibits employers from employing a “use it or lose it” type policy, employers should encourage the use of earned PTO prior to converting to an UPTO policy. 
4. Manager Discretion and Fairness
   Managerial inconsistency is a recurring challenge. Without clear criteria for approvals, employees may perceive favoritism or experience fundamental inequities, which can lead to morale issues or potential legal claims.
5. State Paid Leave Considerations 
   Colorado, like many other states, offers partially paid family and medical leave to employees. Colorado’s Family and Medical Leave Insurance (FAMLI) program offers 12 weeks of partially paid leave to eligible employees. Employees might utilize their unlimited paid time off in lieu of applying for FAMLI benefits, prolonging an employee’s ability to later use job-protected leaves like FAMLI. 

Should Employers Offer It?

Benefits:

• Strong appeal among younger talent.
• Reduced administrative tracking.
• Potential savings from not paying out unused leave.

Risks:

• Legal compliance with sick leave, FMLA and wage laws.
• Inconsistent usage and underuse by employees.
• Managerial confusion and inconsistent enforcement.
• Potential resentment from employees who are not eligible for the benefit.

If you are considering rolling out or refining an unlimited PTO policy, take the following steps:

1. Define Who Gets It: Will it apply to all staff? Only exempt employees? Be clear and transparent.
2. Handle Accrued Leave Carefully: Consult legal counsel about paying out or phasing out existing PTO balances.
3. Coordinate with Other Leave Policies: Ensure that FMLA, ADA, HFWA (Colorado only), FAMLI (Colorado only) and other leaves are clearly defined and not overly broad in your UPTO model.
4. Train Managers: Equip them with guidance and documentation tools to ensure consistent approvals.
5. Clarify the Policy to Staff: Communicate expectations, coordination with other leaves and the process for administering the benefit.
6. Consider Hybrid Models: Some employers are adopting generous yet structured policies that strike a balance between clarity and flexibility.

Unlimited PTO originated as an innovative initiative aimed at fostering autonomy and trust. Two decades in, the model has matured — and shown its limits. While some organizations still find it valuable, others are scaling back, citing confusion, legal complexity and cultural clashes.

It remains an option — but not a cure-all. As of now, UPTO is less a revolution than a choice. For some organizations, it works. For others, it may be time to return to clearly defined, equitable and manageable leave programs.

Either way, the key is thoughtful design, legal awareness and a culture that encourages people to take the time they need.

If you have questions or need support tailoring a compliant approach for your organization, contact the Employers Council for guidance. Also, members can reference the UPTO white paper on our website.