Name: The Truth Behind ‘Unlimited’ Vacation Plans
Uploaded: 2023-08-04T08:50:10.000Z
Duration: 4 min 5 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

You've seen it in more and more job postings, unlimited vacation.

Only about 8% of employers offer this perk, according to a recent survey from the Society for Human Resource Management,

That's up from 6% of employers compared to the same survey in 2022.

So did you find the Holy Grail of companies?  Or is unlimited PTO too good to be true?

You could be pretty sure that if you decided to take six months off, they're going to stop you.

The idea of unlimited vacation is not a formal promise.

This is Professor Peter Capelli. He teaches at the Wharton School.

I've been at the Wharton School for 38 years. I'm like a piece of furniture.

Professor Capelli has been looking into trends like unlimited PTO and the push from pensions to employee-driven 401k plants, he found a common threat.

Most of these so called perks are ways for companies to reduce liabilities, simply put their accounting tricks.

I think my interest in it came by looking at various ways in which companies seem to be managing employees that didn't make a whole lot of business sense or even management scam now,

and the issue of financial accounting drives a lot of that behavior.

And is there things that maybe look cheaper from financial accounting perspective, but in the long run probably is not layoffs are one of them, right?

The evidence seems to be the business actually is better if you can delay layoffs as long as possible,

because you might save money on the cutting side, but you lose capability on the rebound side when the economy picks up.

So I was interested in those kinds of questions.

And you know, the big thing about unlimited vacation, and the main motivation for doing it is that a lot of employee benefits vacation time, in particular, but also sick leave and things like that are accrued benefits.

And that means that you earn them basically by working and the employer effectively kind of owes them to you.

And so they count as liabilities on the company's balance sheet.

So if you can dump those liabilities, and then suddenly the company is more valuable, and that is what unlimited vacation time does.

I don't think employees understand that, that basically by telling you, we're moving to this new model of dumping their obligations to you under the old model,

where you actually kind of had a right to some of that vacation time.

Now in fairness, that's because they were working instead of taking their vacation time, and typically not by choice.

So you probably know most Americans don't come anywhere near using all their vacation time.

And the main reason they say they don't take it is because of work demands.

You know, "The organization is running so lean, we can't get our work done if you take your vacation, so please stay and work."

So it's not that, you know, the company is doing them a favor, it's the employees can't use their vacation time.

So they end up getting paid for it at the end.

If you're an employer, employees are a huge part.

They're typically the majority of your costs.

And so it's not probably surprising that they are trying to find ways to cut those costs.

They're also trying to find ways to look better on financial accounting terms.

So as investors became more important, financial accounting became more important.

And companies have pursued lots of efforts to cut those accounting costs.

And pensions are a big one. Those were big liabilities that companies owned.

So we dumped in pension plans, we moved to our defined contribution plans, suddenly the company is more valuable because those liabilities disappear.

I imagine the same thing will happen with other things like sick leave and anything else the company owes to employees.

It's really driven by these financial accounting concerns.

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The Truth Behind ‘Unlimited’ Vacation Plans

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