Microsoft will no longer continue paid-time-off model for US employees, switching to ‘unlimited’ PTO system

Tech giant Microsoft will no longer continue the paid-time-off model for United States employees and moving to a “discretionary leave” system that allows workers to take time off as needed.

Full-time US employees no longer need to track vacation time, according to an email sent out today by Kathleen Hogan, chief human resources officer at Microsoft, and viewed by Fortune. Through January 16, employees will no longer accumulate vacation hours, maintain vacation balances, or roll over unused vacation days to the following year. The email states that this policy change is for U.S. employees and does not apply to part-time or non-exempt employees.

With 122,000 U.S. employees as of June 30, Microsoft appears to be one of the largest companies to adopt the discretionary leave model.

“We are adopting a more flexible approach to vacation time and now we no longer have to log vacation time, but we all need to maintain the highest standards of work and make sure we deliver on our commitments,” it said in an email.

“Starting January 16, 2023, Microsoft will modernize its leave policy to a more flexible model and transition to discretionary leave (DTO). How, when and where employees do their work has changed significantly, and DTOs align with more flexible ways of working,” a Microsoft spokesperson told Fortune. News of the change was first reported by The Verge.

Prior to the new discretionary leave system, Microsoft employees received three weeks of paid vacation per year, plus one week every six years, for a total of up to six weeks. Major Microsoft subsidiaries, GitHub and LinkedIn, already use randomized PTO systems.

Tech companies like Netflix and Oracle have similar discretionary time-off systems, but they are still relatively rare in large enterprises.

And while this system is sometimes referred to as “unlimited leave,” it’s not universally loved by employees. Some critics say this model creates social pressure to make employees fear vacation, allowing employees to take less time than an officially mandated annual leave system. Employees may lose money if their employer has previously paid for unused leave.

One Microsoft employee said of the change, “Everything feels like cost savings, and you have to make sure you’re doing real work.” “Unlimited PTO is basically never positive.”

Sources told Fortune that Microsoft is maintaining 10 paid vacation days per year, with absenteeism unchanged. It also plans to maintain the ‘Holistic Health Time Off’, which was called Sick Leave and Mental Health Day. All leave options are also unaffected, according to screenshots of the new rules seen by Fortune.

Employees with unused leave by January 15th will receive a one-time payment on their April 14th check, the email says.

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