How to Create a Flexible Vacation Policy

Between unlimited, floating, paid, and more, what type of vacation should you offer at your small business? Here’s a case for a flexible vacation policy.

what to know about a flexible vacation policy

One of the biggest keys to employee satisfaction within a business lies with the company vacation policy. The policy your company chooses has the power to improve employee attraction, productivity, and company culture. In recent years, flexible vacation policies have emerged as a common trend among companies of all sizes. Here’s why.

What Is Flexible Time Off?

Flexible time off allows employees to take time off at their choosing, generally without accumulating or counting the hours. Millennials are often considered responsible for flexible time off as they’ve been the largest group to press for more flexible and accommodating benefits. Fun fact: some Millennials actually consider flexible work arrangements to be just as important as health benefits or salary.

By 2020 about 50% of the workforce population will be Millennials and around 75% wish to travel abroad as much as possible. Offering a flexible vacation policy can be a key element to bringing in and holding on to employees for longer periods for time.

A flexible vacation policy can be seen as a “pot of gumbo” for time off policies as it provides a creative and nontraditional outlook on what can be considered as time off, along with morphing traditional/unlimited policies into one. For example, time off policies 20-30 years ago strictly only covered vacation and sick days, whereas now it can cover personal days, every federal holiday, leaves of absence, and even days for bereavement.

What Does Flexible PTO Mean?

In general, flexible PTO is a process in which employees don’t have to separately accumulate sick days, vacation days or other types of sick leave. Instead, they are given PTO days or overtime hours, which they can take for any necessary purpose. Employees can receive a set number of PTO days through multiple ways such as the start of a year, monthly periods, or hours from each paycheck.

For example, an employee could accrue 3.0769 hours per pay period worked which would provide them with about 10 days of PTO for the year (this calculation assumes that there are 26 pay periods for the employee). The good thing about having a flexible vacation policy is that provides a balanced work-life structure, giving your employees a variety of options on how they can use their time off. Read more here about how to prorate vacation days.

A Yearly Flexible Vacation Policy Outline for a Company could look something like this:

Vacation: 10 days (Time off for traveling with family and friends)

Sick: 7 days (Time off being sick and unable to come to the work)

Personal: 3 days (Time off for reasons that don’t fall into traditional sick or vacation)

Holidays: 10 days (Be sure to outline what Federal Holidays will be counted, especially your business doesn’t close on holidays)

Leave of Absence: Can be up to 12 weeks (May be granted in certain situations and depending on your company’s policy, may be paid time off)

Grieving: 2 days (This type of time is traditionally given to employees when they experience a death in their family)

Though time off policies will look different by each state and from one company to the next, it still gives you an insight on how businesses across the country are currently restructuring their PTO policies.

Is Unlimited Vacation Paid?

The answer to this question can be yes and no. Companies that have an unlimited vacation policy in place typically offer paid vacation time off to their employees but it’s not unlimited. For example, if an employee takes 23 days off in a year, they might only receive PTO for 16 days instead of all 23. The main difference between unlimited vacation policy and flexible vacation policy is the structure.

An employee who has a flexible vacation policy will typically know how much PTO days they will have per year to use for time off, whereas an employee on an unlimited vacation policy will typically not be aware of how many PTO days they have for time off. Even though in recent years, having an unlimited vacation policy in place has helped attract top talent, without extra costs of offering higher salaries there can still be consequences such as employees taking too much time off or as little to no time off.

Just Remember: Businesses will continue trying to find new ways to satisfy employees, and having a flexible vacation policy in place is definitely a step in the right direction.

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