Microsoft is changing its vacation policy to give its US salaried employees unlimited paid time off (PTO). The new policy, which goes into effect on January 16th, will allow salaried workers to take off as much time as they want.
The radical move, announced by Microsoft’s chief people officer this week, follows a successful year of innovation, and strategic moves to retain its top talent – despite its record-breaking layoffs.
At a time where quiet quitting is high, and businesses are being more restrictive in their policies, Microsoft’s flexibility may be a warm welcome for prospective employees. But, it’s not the only company to introduce the policy.
Microsoft’s Unlimited Vacation Policy Explained
On January 16th Microsoft will be giving its US employees unlimited PTO. The new policy, described as ‘Discretionary Time Off’ (DTO), will allow salaried employees at Microsoft to take as much vacation time as they need, without having to accrue paid leave.
Beginning January 16, 2023, Microsoft is modernizing our vacation policy to a more flexible model and transitioning to Discretionary Time Off (DTO)….How, when, and where employees do their jobs has dramatically changed and DTO aligns with more flexible ways of working. – Kathleen Hogan, Microsoft Chief People Officer.
In addition to DTO, Microsoft will offer workers 10 additional corporate holidays throughout the year, plus time off for bereavement, leaves of absence, sickness, mental heath and jury duty. Employees outside of the US, and on an hourly contract will not be entitled to DTO due to hourly laws, and the differences in Federal and State wage.
Eligible employees with unused vacation balances will receive a one-time payout for accrued days in April, and all new employees will no longer have to accrue their vacation days.
What is Unlimited DTO, and Does it Work?
DTO is when a company no longer logs, tracks or requires employees to accrue vacation days in order to enjoy paid leave. The radical policy is designed to promote more flexibility in the work place, and encourages employees to collaborate with their supervisors to determine which vacation days they can use, and when – without specifying a maximum or minimum number of vacation days per year.
Businesses in favor of DTO have referred to the policy as a way to enable employees to ‘better meet their personal needs’ and bring their ‘best self to work’, while others question its legitimacy and practicality.
Users on Linkedin described DTO as simply ‘a way businesses to save money’ as companies will no longer be required to pay out vacation time when an employee leaves. Others felt it was a way to ‘discourage employees from taking time off in the first place’ as the agreement is still subject to approval.
Twitter users were also divided. Those in favor described Microsoft’s new vacation policy as ‘amazing news’ and a ‘massive upgrade to benefits’, whereas others were skeptical.
DTO, or unlimited vacation time in companies isn’t new. In 2003, Netflix introduced unlimited PTO as a way to ‘give high performers a little more control over their lives’ and demonstrate ‘trust’. CEO, Reed Hastings, stated ‘Time off provides mental bandwith that allows you to think creatively and see your work in a different light. If you are working all the time, you don’t have the perspective to see your problem, with free eyes.’
“I have never paid attention to how many hours people are working. So, why should I care if an employee works 50 weeks a year or 48 weeks a year?” – Reed Hastings, Netflix CEO.
Project management pioneers, Asana, is also known to promote unlimited PTO, as well tech company, Roku, who maintained that it was a strong part of their company culture – one that ‘pushes staff to be independent [and] productive at work, [while] maintaining a good work/home balance’.
Employee opinions appear to differ, though. On Twitter, users described DTO as being restrictive, and a way for business to grant less holidays – with some claiming they would avoid it altogether.
Others had more positive experiences, believing DTO to ultimately be a ‘good thing’ but highly dependent on the business or organization you’re working for.
Is Unlimited PTO Right For Your Business?
Whether unlimited PTO is right for your business will depend on the size of business, the culture and your business’ needs. In order for DTO to work, employees will need to ensure that their work is still delivered on time, and that there is cover for their workload – which could restrict employee flexibility.
Jobs board Reed reported a 20% hike in the number of new openings advertising unlimited vacation as a part of its benefits package in 2020, And in a competitive job market where companies are struggling to retain their top talent, and employees are demanding more flexibility, unlimited holidays could be a great incentive.
DTO isn’t for everyone though. Buffer, which introduced unlimited holidays in 2019, found that their employees were taking less holidays, so instead changed their policy to introduce a minimum vacation time of three weeks per year. And Kickstarter, changed its policy to a set number of days, for the same reason. Still, if the demand for remote work in last year has taught us anything, it’s that employees want more flexibility. Building trust, and prioritizing your employees needs may be the way to do it.
