Unlimited PTO: Where It Came From. And Does It Still Make Sense for Startups?
For many US tech companies, especially startups, offering unlimited PTO has become almost expected. A perk meant to signal trust, flexibility, and a progressive culture. However, in a recent article in Fortune magazine it was announced that the boss of $11 billion fintech company, Bolt has just axed the policy altogether. Its founder and CEO Ryan Breslow says instead of encouraging flexibility, it bred burnout and unfairness.
How did unlimited PTO become a ubiquitouos benefit? And does it still make sense for startup founders today, especially those operating across multiple states?
Let’s look at the origins of unlimited PTO, and weigh the pros and cons for modern startups.
📜 The Origin of Unlimited PTO
Unlimited PTO emerged in the 2000s and 2010s, largely among California-based tech companies. Why? Two big reasons:
1️. California’s Vacation Payout Laws
In California, vacation time is treated as earned wages under Labor Code §227.3 (since the late 1970s)
- Employees accrue vacation as they work.
- Employers can’t have “use it or lose it” policies.
- All unused vacation must be paid out when an employee leaves at their final pay rate.
For employers, this created a growing liability on the balance sheet, especially in high-salary environments like tech.
Unlimited PTO provided a legal workaround:
- If there’s no accrual, there’s nothing to pay out at exit.
- The company avoids the risk of large vacation payouts.
2️. Talent Competition & Startup Culture
Unlimited PTO also aligned perfectly with the startup ethos:
- “We trust you to manage your time.”
- “We care about outcomes, not hours worked.”
- “We’re not bureaucratic about leave.”
It became a recruiting tool. A way to stand out and appeal to ambitious, self-directed employees.
🚀 Why Startups Still Offer Unlimited PTO
Even beyond California, unlimited PTO spread across the US as remote work and flexible cultures became the norm. Today, startups in New York, Texas, Colorado, and beyond continue to offer it for these reasons:
✅ Pros:
- No accrual liability: No financial obligation to pay out vacation on termination.
- Flexibility: Attracts employees who value autonomy.
- Simplicity: No need to track vacation balances or carry over unused days.
- Cultural alignment: Fits modern, results-oriented workplaces.
- Cost control: Employees often take less time off than with traditional plans.
🛑 But There Are Risks & Downsides
However, unlimited PTO isn’t always the perfect solution and can even backfire if not implemented thoughtfully:
⚠️ Cons:
- Employees take less time off: Without clear guidance, people may feel guilty or unsure about taking leave, leading to burnout.
- Perception of unfairness: If managers or peers don’t model taking time off, others may feel they can’t.
- Legal risk if poorly executed: If the policy is “unlimited” in name but capped in practice, some states may treat it like accrued vacation.
- Inconsistent across states: Some states have specific requirements (e.g., mandated sick leave) that an unlimited policy must explicitly account for.
- Harder to plan coverage: Without a set number of days, managers may struggle to schedule resources when multiple team members take leave at once.
🧭 Best Practices for Startups Using Unlimited PTO
If you decide unlimited PTO fits your culture and goals:
- Write a clear, compliant policy — define how and when it can be used.
- Encourage managers to model healthy time-off behavior.
- Track usage informally to ensure employees actually take time away.
- Comply with local/state laws for mandatory paid sick leave (unlimited PTO does not automatically satisfy those requirements).
- Provide guidelines — for example, recommend taking at least 3–4 weeks per year.
✨ Final Thoughts
Unlimited PTO started as a creative response to California’s strict vacation laws and has evolved into a hallmark of modern tech culture.
For startups, it can be a smart way to offer flexibility and reduce administrative burden but it requires intentional communication and management to avoid unintended consequences like burnout or legal exposure.
Before adopting unlimited PTO, assess your team size, culture, and the state laws where your employees live. And remember it’s not about having a trendy policy it’s about ensuring your people can actually rest and recharge and you remain legally protected as an employer.
Reach out to our In2America team for help and advice about implementing and executing the right policy for you.