February 13, 2024
What is Discretionary Time Off? (DTO)
We’re in an age where new workplace terms are being thrown at us from all angles. One you might have heard ...
But for some, this sounds like a terrible idea. Let employees go on leave whenever they want? No one will ever come in to work?
Unlimited PTO abuse is less common than you’d think. In fact, the most common issue is not employees taking advantage, but those in charge doing so.
However, it is worth thinking about this scenario, if you’re going to do unlimited PTO in your workplace. Read on, and we’ll explain how to mitigate and handle the risk of unlimited PTO abuse.
Unlimited PTO is perhaps not the best term to use, because this type of leave policy is very rarely “unlimited”.
There’s the limit of fair-use which almost all companies abide by. Someone wouldn’t be allowed to go on leave more often than they’re at work, and still be paid for those days. Yet if you took the name literally, one might assume this is allowed.
For that reason, the term “flexible leave policy” might be a better one to use. This doesn’t imply a free-for-all, where people can do whatever they want.
Your first step should be to set these expectations with your employees. Explain that, though the policy may be called “unlimited”, it does come with an upper limit, albeit not a strict limit (e.g. 15 days maximum).
Put this in your new employee orientation, employee handbook, or anywhere else you see fit.
Unlimited PTO means there’s no set number of vacation days available to employees. But you can still require a request and approval process for someone to take time off.
Most companies that do unlimited PTO still have this. An employee has to request leave from their manager or direct report. And that person needs to ok it, by making sure no key business operations will be disrupted.
This allows you to track how often people go on leave and better understand issues of abuse before they go too far.
The most important thing with unlimited PTO is to set clear, measurable performance indicators (KPIs) to measure employees by.
The idea of unlimited PTO is to allow employees to take as much leave as they want, as long as they get the job done. To know if they’re doing the job or not, you need a way to track their performance.
With the right KPIs, you avoid any semantics about the leave policy, and how much leave is ok to take. Instead, you make it clear that employees are free to go on leave, so long as they continue to meet their KPIs.
If someone meets a month’s worth of work, at the desired standard, in just 15 days, why not let them go on leave for the rest of the month?
Another thing people get wrong about unlimited PTO is that you don’t need to track it at all.
Even if you don’t require people to get approval for leave (this is the case in a lot of smaller tech startups), you should still keep track. You’ll want to know if someone won’t be around, for scheduling and lining up meetings and projects.
But leave tracking also helps you identify trends, and address any problems of people taking more than their fair share of leave (or not enough).
Use a tool like Flamingo’s Vacation Tracker Software to keep a line on when your team members go on leave. It lets you pull up quick reports on employees’ leave activity, so you can pick out trends at a glance.
Following the earlier tips will help you to prevent issues of abuse, as well as making it easier to manage when abuse does happen.
For example, it will be much easier to sit down and talk to a person who takes too much leave if you’ve already outlined that unlimited PTO comes with fair use.
And with clear KPIs in place, you can point to these as the issue, rather than the employee taking too much “unlimited” leave.
When it does come time to address someone who takes too much leave, be sure to keep it professional. Point it back to the needs of the business, and the effort that the whole team needs to put in to keep the business, or the department, working effectively.
Again, it will also be a lot easier to reign someone in if you’ve set expectations that leave needs approval, and isn’t just a case of “come and go as you please”.
The main thing you want to take away is that it’s much easier to think about preventing people taking advantage of your leave policy, than waiting until there’s a problem to take action.
Most people think the problem with unlimited PTO is employees taking too much leave.
In reality, it’s almost always the opposite. With no clear expectation of what’s ok and what’s not, people are afraid to look like they’re taking advantage of the system.
This results in people taking less time off with unlimited PTO, compared to traditional PTO policies.
Results vary – in some cases, companies that switch to unlimited PTO see the average number of PTO days drop by 2 per employee per year. This can be a problem, as it leads to employees feeling overworked and overwhelmed.
Instead of focusing all your energy on potential cases of employees abusing the system, think about ways to encourage people to take enough leave.
Use the same systems for identifying trends to notice who is going too long without taking a day off. This is just as important as people taking too much leave, as you risk losing talented staff when they become overworked and burnt out.
In addition, you could do what some companies, such as Evernote, do, and offer incentives for people to take their time off.
The fact that a company like this offers an actual $1,000 bonus for people who take 5+ days off in a single go shows how much they value employees getting sufficient time off to rest and refresh.
Summing up what we talked about in this article:
Flamingo makes managing your team’s paid time off a breeze.