"Unlimited PTO" is the rare benefit that costs the company nothing and is marketed as if it cost a fortune. That should be your first clue.
It shows up on the careers page next to the free snacks and the foosball table, framed as radical trust: take as much time as you need, we're all adults here. And on the surface it's hard to argue with. Who's against more vacation?
But look at what the policy actually does once it's in place, and a different picture shows up. People take less time off, not more. And the company quietly sheds a financial obligation it used to carry on the books. Both of those are features, not bugs — they're the reason the policy is attractive to the people who approve it.
The floor disappears, so people anchor low
A traditional policy gives you a number. Twenty days. Those days are yours; you accrued them; not taking them feels like leaving money on the table, because it is. The number is a floor you instinctively try to reach.
Unlimited PTO deletes the floor. "As much as you need" sounds generous, but it hands every employee an open-ended judgment call with no reference point — and in the absence of a number, people don't anchor high. They anchor on what their peers seem to take, on how busy things are, on whether asking will make them look less committed than the person who didn't.
The result is predictable, and it's been reported consistently: at companies that switch to unlimited PTO, average days taken tend to go down, not up. The ambiguity does the work. Nobody wants to be the one who took "too much" of an amount that was never defined.
The liability you didn't know you had
Here's the part that rarely makes the recruiter's pitch.
Under an accrual system, unused vacation is often money the company legally owes you. In California, for instance, earned vacation is treated as wages — it can't be forfeited, and any unused balance has to be paid out when you leave. (California DLSE) For a company with a few hundred staff, that accrued balance is a real liability sitting on the balance sheet, and a real cheque at every departure.
Switch to "unlimited" and there's nothing to accrue. No balance, no liability, no payout when someone leaves. A company moving off an accrual model can wipe that obligation in a single policy change — and book it as a win for employees while doing it.
So the same policy that gets sold as generosity is, for the employer, a way to stop owing people a thing it used to owe them. You're not getting unlimited vacation. You're getting your vacation converted from a tracked asset you could cash out into a vague permission you'll probably underuse.
This isn't a reason to ban it
To be fair: unlimited PTO isn't inherently a scam, and plenty of good companies run it in good faith. The flexibility is genuinely nice when you need a random Tuesday for a dentist appointment without watching a balance tick down. The problem isn't the idea. The problem is running it with no floor and then acting surprised when nobody takes time off.
The failure mode is treating "unlimited" as the whole policy. It isn't a policy. It's the absence of one.
What to do instead
If you're going to offer it, offer it honestly — design against the underuse instead of profiting from it.
Set a minimum, not just a maximum. Mandate a floor — "everyone takes at least 20 days, no exceptions." A minimum kills the ambiguity that makes people take too little, and it's the single highest-leverage fix.
Track and publish the average. What gets measured gets normalised. If leadership can see that the team is averaging nine days, they know the policy is failing its stated purpose. If nobody measures it, "unlimited" just means "untracked."
Make leaders go first, visibly. People take their cues from the most senior person they can see. If the founders never take a real break, neither will anyone else, regardless of what the handbook says. Take the holiday, mention it, come back.
Be honest about the liability. If you're switching off accrual partly to clear a balance-sheet obligation — and that's often the real reason — don't dress it up as a gift. Employees can tell the difference, and the trust you lose pretending costs more than the policy saves.
The test for any benefit is simple: does the behaviour it produces match the story told about it? Unlimited PTO, run carelessly, fails that test — the story is "take more," the behaviour is "take less," and the gap is where the savings live. Give people a number they're allowed to hit, or admit the perk is mostly for the people who sign off on it.