Unlimited time off, flexible time off, discretionary time off – these buzzwords have been showing up increasingly in the workplace vernacular since companies like Netflix, Hubspot, General Electric, and Virgin began moving away from traditional time off policies nearly a decade ago. But what do they mean? It may seem like alternative paid time off policies all fall under the same blanket, but the devil lies in the details. How you define your open-vacation policy down to its name can have a major impact on your company's culture and operations.
Definitions may differ from company to company, but here’s a quick breakdown of some common open-vacation policies and the differences between them:
- Unlimited time off - Also called unlimited vacation or unlimited PTO, employees can decide when and take as much time off as they need without accruing hours and in some cases, getting management approval.
- Flexible time off (FTO) - Also called flexible PTO or flexible vacation, this is time off that employees can take when they choose to and generally don’t have to accrue or count the hours. It can be used for vacation or sick time as needed. Usually requires manager approval.
- Discretionary time off (DTO) - Employees decide when they take time off but it can’t alter their work schedule on a consistent basis. Their time off also can’t cause excessive burdens on their co-workers. Usually requires manager approval.
Considering an Open-Vacation Policy?
Open-vacation policies can be highly beneficial to employees, not to mention an enticing recruitment tool for new hires. It allows people to more effectively manage their work, and it eliminates the stress of minutia. Taking an afternoon off to take care of a sick child or to see their sporting event is no longer a matter of sacrificing sick days or chipping away at an already limited number of paid days off.
Employers also benefit from the elimination of a complex system of unused and forfeited days off, and the costly payouts for companies therein. Tracking individual hours can make managing vacation time difficult as well.
Why "Unlimited" Became "Flexible" Time Off
But the fact that open-vacation has evolved from "unlimited" to "flexible" to "discretionary" over the years highlights some of the challenges that companies might face implementing this type of policy. Early on, companies found that calling their policy "unlimited" lead to undercommunication around absences, causing an unnecessary burden on other team members due to frequent absences or lack of awareness for absences.
So "unlimited" was redefined - and with the name changes came the introduction of manager oversight, approvals, vacation minimums, caps, coverage assignments, OOO calendar events, etc. - putting more onus on an employee to account for their team and responsibilities and leading to better intra-office communication.
Kickstarter moved from an unlimited to discretionary policy due to employees’ confusion and lack of communication. They found employees were taking even less days with unlimited vacation, but with discretionary time off and a cap of 25 days, there was a better response. Sailthru found that discretionary time off allowed them to give their employees freedom while tacking on directives that kept the office running smoothly. LinkedIn adopted a discretionary time off policy in 2015, citing the ownership and health benefits it granted employees as a reason to press forward. Pat Wadors, LinkedIn’s HR executive, even called the policy an “intelligent risk.”
No Policy is Perfect
Although it's a small and often overlooked process/policy, time off can have a profound impact not only on employee health, but on your company's operational efficiency as well. Careful consideration must be taken when writing any time off policy, especially an open-ended one. It doesn't necessarily matter what you name it. What matters is the structure you build around it, the process you define in your handbook, and the overall ethos and dedication your team has toward balancing wellness with responsibility.
If you're struggling to scale your open-vacation policy, take a look at how some reputable companies define their vacation policies in their employee handbooks.
And check out PTO Ninja, a Slack app that can help you maintain structure and visibility around absences without making employees feel like they're being tracked. Used by over 400 teams in 65+ countries!