Growth by Design
Growth by Design isn’t just another business podcast; it’s a conversation about building stronger organizations by design, not by chance. Each week, we dive into the realities leaders and entrepreneurs face: scaling teams, navigating shifting markets, and overcoming hurdles every business encounters. You’ll hear timeless strategies paired with fresh insights from years of partnering with companies across industries. Expect discussions on empowering employees, strengthening culture, tackling sales challenges, marketing missteps, and accounting lessons learned the hard way. We’ll share case studies, break down current market climates, and spotlight trends that matter today and tomorrow. Each episode also features a Recruitment Tip of the Week with practical, actionable advice on hiring, retention, and talent strategy. Growth by Design gives leaders the tools, context, and perspective to put into practice immediately.
Because growth doesn’t happen by accident—it happens by design.
Growth by Design
Your PTO Policy Says What You Believe About Work
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Your PTO Policy Is Costing You More Than You Think (Unlimited vs. Lumped PTO) | Growth by Design
Welcome back to Growth by Design, brought to you by RX2 Solutions, because growth does not happen by accident, it happens by design. In this episode, Rob Graham and Ross Rosner break down what your PTO policy is really costing you, in dollars and in culture. U.S. companies are carrying roughly $225 billion in unused PTO liability, about $2,000 per employee, and most owners never see that number.
Rob and Ross walk through the three common ways companies handle time off, unlimited PTO, separate sick and vacation buckets, and one consolidated PTO policy. They dig into the trouble each one creates, from unclear expectations and manager trust to the year-end shutdown rush and payout liability that changes from state to state.
Their recommendation is a clear, well-defined consolidated policy with limited carryover, around five days, and an expiration window so time off is staggered and the financial exposure stays in check. They also point to data showing employees on unlimited plans often take just 11 to 13 days a year because no one tells them where the line is. The episode closes with a recruiting tip: lead with your PTO philosophy and culture, not the day count.
Episode Timeline
00:00 Introduction to Growth by Design
00:17 Hidden PTO Liability
00:58 Unlimited PTO Pitfalls
02:47 PTO Types Explained
04:45 Carryover and Payout Rules
06:37 What the Data Shows
08:21 Add Guidelines to Unlimited
10:30 Make PTO Clear and Fair
13:27 Recruiting Tip and Wrap
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Growth doesn't happen by accident. It happens by design.
Hi, and welcome back to Growth by Design, brought to you by RX2 Solutions. Because growth doesn't happen by accident, it happens by design. I'm Rob Graham. And I'm Ross Rosner. And in today's show, we're going to be discussing your PTO policy and how it really affects your business. So, one number that business owners tend not to think about or truly know is what is their PTO policy going to cost them. And right now, America's companies are plus or minus $225 billion. Yes, billion dollars in potential PTO liability in unused time. And that equates to a little little under $2,000 per employee. Sure.
SPEAKER_00Yeah, I mean, for me, it's not just the the cost of the actual time, but the opportunity cost of the employee not being there. One thing that I know is is kind of fashionable now is companies offering unlimited PTO. That's something that I've never truly understood. You either get an employee that's taking way too much time off or not enough, just because just because there's not enough guidance around it. And every, you know, the people that get retained are the ones that continue to provide that actual value minus that actual headache. And when you're giving unlimited PTO, someone doesn't know how much value and headache they're providing. They just really don't have guidance on it. And I think that it tends to throw that equation out of whack. And nobody wants to be the person that takes the one extra day of PTO that breaks the camel's back, and that's the reason they get let go.
SPEAKER_01And the other problem with unlimited policies is businesses who do that are setting the example that their managers don't know how to, or they don't trust their managers to set their vacation time. Right? They don't know, hey, the is this a good use or not a good use type issue. And that's the message that a lot of these unlimited PTO companies are sending out there. Is hey, this is great, but yeah, if you take 200 days off a year, you're still gonna pay me the same salary? Like if you are, sign me up.
SPEAKER_00I mean, we're going through that right now with the Sixers that just got eliminated. I mean, you talk about Embiid, who's getting all this money and he's played half the games over the last 10 years, and everybody's mad about it. And it's like, well, where's the line? If he played 60%, would it be okay? Is it okay if you play 70? I mean, that's where the whole value versus headache thing comes in for me. It's, you know, how much value can you really provide the company if you're taking 200 days off a year? Maybe you're the top sales rep and you can do it. Okay, great, have fun. But like if you're not, I I don't know where P if people that actually know where that line is.
SPEAKER_01Sure. And so companies tend to lump into three things, three different areas for PTO. They have the unlimited, which we briefly discussed, then they separate vacation and sick leave, right? And then they just have a PTO policy where everything is kind of together. And what we're seeing out in the market, and what we've seen through the you know 20 years that we've been doing this, is that companies who have a sick leave and a vacation policy tend to not fully trust their employees on how to manage their time off because they're gonna sit there and say, hey, this is the sick leave, this is the PTO, and this is your vacation, and that's that. But if you have a migraine, okay, why can't you just take a day off, right? You're not trusting that person to do that. If you have the flu and you're out sick for a week or whatever it is, okay, but let's say you're not sick. Do you just want people calling out randomly? No, they're gonna do it. So, you know that policy there where you're talking about lumping them together has a lot of problems. The other thing is, is if someone leaves, you gotta pay them out on that vacation policy. Depends on the state, but yes, so there could be some added costs into that just because you differentiated that. The other thing, or the complete other side, is just an overall PTO policy, and that from an employer standpoint, you're you're telling your employees like, hey, I trust you, you're going to be able to use your time as you want. If you don't get sick, take the time off. If you get sick, use your PTO, you know, and and you're gonna hope that most of your employees are going on really cool vacations, not stuck in bed. And then you can kind of get more in the nitty-gritty here with a lot of these, excluding the unlimited policies. You have, do you carry over? Is there no payout? Or is your company just not clear? Is it vague? Do you not have anything established for what happens at the end of the year in your PTO policy or your vacation policy? Unlimited, it doesn't matter. But when you have a defined number there, what do you do? Do you pay everyone out? Well, then that becomes your CFO's problem now. He or she needs to figure out where you're gonna get all this money for, right? If everyone just takes off the time, well, that's a whole business problem now because then your company's pretty much shut down for the month of December. Everyone's trying to squeak every little ins, you know, of the rest of the PTO vacation that they didn't use. And I keep saying PTO because our policy is a PTO policy. We don't have a vacation plus, you know, sickly for people who are listening. The other part, and we recommend and we like it, is the carryover. Okay, carry over five days and then set an expiration time. If you go mid-year, you're gonna be able to stagger your workforce off, so it's not gonna be affecting your company's performance, your clients aren't affected by it, and your pocketbook isn't affected by it at the end of the year when you're paying out you know, tens, hundreds, millions of dollars of PTO, depending on what size your company is. You know, I know for us, I think people generally enjoy just having it all lumped together and just going with it. Uh as clear as defined, and in that's part of it. But there's you know very there's data that sits there and provides you know what business owners should think about PTO and how to break it up. Most people start their PTO time like years one through three, and you get like 10 days or 11 days, and then years three through five, you get to like let's say 12 to like 17 days, and then four plus you're at like 20, and then maybe hit a 25 or in there or not, right? People who have unlimited PTO times or PTO days rather take somewhere between 11 to 13 days off a year. That's it. Because they don't know how many days they can do. Is it too much? Is it not? So, on average, according to the BLS, that's the what they do 11 to 13 times. So if you sit there and say, hey, listen, you get five, six days, and ten vacation days, you're already giving your employees more time than what most unlimited people are taking off.
SPEAKER_00I mean, to me, it's the big red, it's the opposite of the big red button that says do not touch. It's the big red button that says please touch, but everybody's been so conditioned not to touch it that the reverse psychology happens again and nobody touches it because they're afraid of like, all right, is this one extra day gonna be the thing that gets me out of here? I really don't want to go. This unlimited PTO thing's cool. I think the right place is what you were talking about, is right in the middle where we are right now. When you have some health issue, all right, cool, we're not gonna do the PTO, just take care of it, it's a legitimate thing. But then there's the other kind of side of the coin of where you have someone who's underperforming, you're like, wow, they're taking vacation again. Like, what is going on here? So I think it is somewhere in that middle. I think unlimited is just way too far the other way, and it's confusing the employees. And like we were talking about before, it probably is leading to burnout because they're just not actually using the time.
SPEAKER_01Yeah, it it there's so many negatives, and this isn't us sitting here talking that you know, if you do have unlimited vacation time, that you it's a bad policy, you just need to put more guide around guidelines around it. You can't just sit there and say unlimited because no one knows what that ceiling is, which causes the anxiety, which causes the burnout, which causes people not taking it and things and things of that nature. So that's you know, say unlimited vacation up to X days per month, per quarter, per year, whatever that is, so people can see, hey, okay, you know, I'm allowed 40 days off a year, let's just say, and I could take 10 days off a quarter.
SPEAKER_00There's like 230 working days a year, 40 of them, that's like a fifth of the year. You might as well just go down to a four-day work week. You could might as well.
SPEAKER_01You you could do that, and it just gives again business owners and leaders something to think about, right? The same with the sick versus vacation policy. I know that when I started my career, I had sick days and I had vacation days. I would use all my vacation days, which were like 10, and I might have like three sick days. And I was 25 years old, so I didn't get sick. Or if I did, I just showed up to work anyways. And I didn't get paid out for them, I didn't do anything, you just lost them at the end of the year, and that stinks. Especially nowadays with connectivity and how even when people are away on vacation, unless you're in some remote area where you're not getting cell or internet service, so you're still being connected, you're still getting your emails on your phone. You know, it's very hard to disconnect. So having a policy that's out there that allows people to have the guidelines will ease that vacation time and give them a better right. Even when you're on vacation, you're not on vacation. And the thing is, the vacation policy is the most read page in your employee handbook or whatever you got, whatever that you call it. Everyone knows that employee, their vacation policy, their PTO policy, like the back of their hand. So if it's so visible within your organization, make it well read, right? Make it clear, make it understandable, make it digestible. You don't need to put every little thing in there where if you know John needs to leave early to go pick his kids up at school, you don't have to have a clause in there for you are allowed to leave early. One day, like that stuff you can kind of fly you know by the seat of your pants. But the big stuff, how it is accrued, how it's paid out, how it's carried over, it's there. A lot of the more progressive companies that we've we work with, and I will include ourselves in this, are doing the lump PTO, they're doing the carryover. Some of them will offer also factor in a year's worked. We have companies that sit there and say, hey, if you worked five years, you're going to get in this bucket previously in your job. It's another way to reward tenure and to make it more attractive for people who are coming in the organization for newly, and it seems to do pretty well for some companies. You're you're moving the the carryovers five days, move it to June 30th, right? You're not paying them out. If they don't use them, basically, if you don't use those these days in like a year and a half, it's kind of on you. You should be able to figure out five Fridays you want to take off or whatever it is, and go golf or the beach or something like that. Um consolidate the policy into one. Don't let your don't have to force your employees to choose. Hey, is this a sick or is this a personal event? Uh and then with even with kids in that, it can be even more confusing. Does your sick policy consider can count for you and your family? Or is it just the employee? Because people who have younger kids, they might need to be home or take them to the doctors, and it's a whole it's a whole nother thing. Um but make your PTO policy you know clear, generous, enforceable, right? And well defined. And if you do that, it's gonna show that you respect your employees and that you're gonna treat them as adults. You're not gonna micromanage your days off, you're not gonna give them some complex or anxiety of I can't take any days off, and it's just gonna be a a good a good move for it. Um and it kind of ties into uh the recruitment tip for the week here is that when a candidate asks about your PTO policy, right? You don't need to recite the amount of days that they would get day one. Tell them about your philosophy on PTO and how your organization views it. This way they can get a better sense of who and what your company culture is and what you're striving to be than just some straight numbers.
SPEAKER_00Thank you, Rob. Thank you all for tuning in. This has been another episode of Growth by Design, where growth does not happen by accident, it happens by design. Uh, thank you all. We'll see you next time.