Unlimited paid time off is a way to signal to employees that your firm is flexible about them taking time off as needed so long as it doesn't disrupt business. PTO, thus, becomes a way to reward the productive use of work hours.

In brief, if employees' work has met expectations and they've coordinated their leave with others to ensure the absence won't impede the business, they're free to take leave. The policy avoids putting a hard cap on the amount of time an employee can take off each year.

With time off for nonemergency reasons:

• Establish your own rules for implementing the policy. Set a specific process for requesting leave.
• Ask employees to plan for any time off. If they want an extended leave period — several days or weeks — your business may need time to prepare. The longer the lead time, the better your business will be prepared.
• Tell employees to speak with their managers and any co-workers they regularly interact with to plan how to deal with time off.
• Explain that if there are reasons an employee is needed at a time targeted for PTO, the worker should show respect and not demand the time off.

Long preparation is important so no one's PTO disrupts the firm's production or workflow. Preparation in advance may mean alerting clients that their rep will be away and who the alternative is in case of an emergency. Your policy should consider concurrent absences — how to deal with two employees who want the same days off.

The plusses and minuses

Among the positives of PTO are:

• Efficient time management. Workers will stay focused and manage their days well so they can take time off when they're finished.
• Increased productivity. Employees will want to make the most of their time and work efficiently and effectively to set up their next time off.
• Longevity. Workers will stay in their roles longer.
• Recruitment. Employees will recommend your company to other people who are attracted by this benefit.
• More communication. Employees are more likely to be informed about what others around them are doing and what's expected of them.
• Less administration time. You'll reduce the hours you spend tracking employee time off.
• No pressure to come to work sick. PTO may include paid sick days, so workers can take the time they need to get healthy and make up the work when they return. (But check with your state laws—some regulate PTO, requiring paid sick time to be separate from vacation days. And some ban use-it-or-lose-it policies.)
• Work-life balance. PTO gives employees more time to pursue their passions. Studies show employees who take PTO experience less stress and are happier at work.
• Avoid the end-of-the-year rush. Workers won't feel pressure to take days off at the end of the year if they feel comfortable taking them when convenient.

And the negatives

• Unlimited PTO can backfire with some employees who end up taking less than the standard two weeks off because they feel uncomfortable declaring they've completed their work and their schedule is free.
• Without a policy that includes rollover into the next year, workers who are leaving may want to negotiate time-off value as part of their severance. You can maintain that they could have taken their time off.
• How about workers who feel they're doing too much work while their co-workers frolic? Your policy should consider workloads and fairness.

Establishing trust with employees helps unlimited PTO work, as does communication to rid your policy of any ambiguity. Trust can be empowering for workers because it shows you respect their ability to make decisions on how they allocate their time. Be prepared for questions and concerns — and gather feedback. Team members can enjoy vacations, knowing they did everything to let your firm continue until they return and without harming their standing at work.