Organizational Wellness

Flexible Vacation Policy: Attract Top Talent and Boost Morale

Last Updated Mar 17, 2025

Time to read: 14 minutes

As an HR leader, you have a responsibility to keep your team happy, engaged, and thriving. An impactful employee benefits package is key. And one great benefit to add to that package is a flexible vacation policy.

Flexible time off gives your employees the power to take time off whenever they need it. It’s a great way to support parents and caregivers, promote mental wellbeing at work, and allow your team members to prioritize whatever is most important to them. Flexible vacation time also makes your business more attractive to top talent in your industry.

Wondering how flexible vacation works and what sets it apart from other wellness initiatives? Here’s a quick guide to help you get started.

What Is a Flexible Vacation Policy?

A flexible vacation policy, or flexible time off, is a form of paid time off (PTO) that employees can use for any purpose. Under these policies, employees do not have to specify that they are sick, taking time off for caregiving duties, or taking a vacation. They simply have access to PTO whenever they need it.

Most flexible vacation policies don’t offer accrued hours. In other words, employees have access to their flexible vacation hours upon hiring, rather than earning them over time. This makes a company more attractive to new hires. It also helps to max out employee productivity by encouraging positive work-life wellness at all levels.

Why Companies Are Switching to Flexible Vacations

Nearly 90% of employees experienced burnout or mental health challenges in 2023, according to Aflac’s annual workforces report. Flexible time off is one strategy companies are using to address employee burnout and boost morale at work.

Flexible time off is still a relatively new concept. However, it’s quickly gaining traction, particularly in the tech and media industries. Top tech companies including Microsoft, Salesforce, and Netflix now offer flexible policies for various types of leave.

As more industry-leading companies make the switch, it's likely that flexible time off will become normalized in the future. Adopting these policies today can help your business stand out as innovative and progressive.

Types of Flexible Vacation Policies

Flexible time off is not a set-in-stone plan, but a broad term that describes several different types of policies. Available hours, access, and processes for taking time off vary from business to business. It all comes down to what works best for your team.

Here are a few of the most common types of flexible vacation policies:

Discretionary Time Off

Discretionary time off (DTO) is a flexible vacation policy that allows employees to use their paid vacation days at their own discretion. Grounds for time off may include:

Sick leave
Personal days
Mental health days
Vacation time
Parental leave

Many DTO policies set a limit to the number of days or hours available for each employee. They may offer a pre-set number of days for all employees or include an option to accrue hours on top of your pre-set vacation time.

The key difference between DTO and traditional PTO policies is that time off is not categorized. Rather than choosing between a sick day or vacation day, employees can just take a day off when they need it.

Unlimited PTO

DTO, flexible vacations, and unlimited PTO are often used interchangeably, but they are slightly different policy types. Unlimited PTO refers to a type of flexible vacation policy that doesn’t limit the amount of time off each employee can take.

This may seem like a bad idea on the surface. However, unlimited PTO doesn’t mean employees will constantly take vacations. Around 46% of U.S. workers don’t use all their available time off, according to Pew Research. This is mainly because they don’t want to fall behind or don’t want to leave their coworkers overburdened. Unlimited PTO simply means trusting your employees to be responsible for their own time.

Floating Holidays

A floating holiday is a simple form of flexible vacation policy that lets employees take a paid holiday whenever they want. Companies typically offer a certain number of floating holidays each year. They generally don’t roll over to the next year, meaning employees are encouraged to take their free days whenever they can.

Floating holidays can be used for:

Birthday celebrations
Religious holidays
Extending vacation time
Family events
Any personal need

Many companies offer floating holidays on top of their traditional PTO policies. This is a great way to start experimenting with flexible vacations and see how it benefits your team. It can help you build a competitive benefits package without fully converting to DTO or unlimited time off.

Benefits for HR Leaders

Flexible vacation time isn’t traditional. It might even seem risky. How can you avoid falling behind when too many employees take a vacation at the same time? However, when carefully implemented, flexible policies come with tons of benefits for employees and businesses alike.

Here are some of the most notable benefits of flexible vacation policies for HR leaders:

Simplified Administration

Flexible vacation policies can reduce the burden on your HR team by making things simpler. Unlike other PTO policies, flexible vacation time is:

Uniform: If you offer unlimited PTO or DTO with a pre-set number of claimable days, every employee has the exact same amount of available vacation time.
Uncategorized: Offering just one type of leave makes it easier to approve and track each employee’s PTO.
Employee-friendly: Flexible vacation policies are designed to meet every employee’s unique preferences, which can help to reduce HR complaints and all the time-consuming work that comes with them.

These simplified processes can save your team time for more important things. It can also help to limit your hiring burden as your business grows and your HR needs become more complex.

Reduced Absenteeism

Contrary to what you might think, flexible vacation policies can actually improve employee attendance at work. That’s because, with fewer restrictions on PTO, employees are less likely to take unexplained absences throughout the year.

Allowing employees to claim time off for any reason also gives you time to plan ahead for an absence. You’ll know when to expect fewer workers, so team leaders can manage projects and set deadlines accordingly.

Enhanced Recruitment and Employee Retention

A flexible vacation policy can be a useful recruitment tool, helping you bring more talented employees to your business. It shows applicants that you value work-life wellness and put your employees’ needs first.

On top of that, flexible time off is great for employee retention. Poor benefits and a lack of flexibility are among the top reasons people choose to leave an employer, according to a Statista survey. Flexible vacations help support a positive work environment that encourages people to stay.

Easier Time Off Tracking

Whether you rely on time off tracking software or a manual system, a flexible vacation policy makes it easier. You can track each employee’s vacation time without worrying about which type of PTO they’re using. Or, if your business offers unlimited PTO, you may not need to track time off at all.

Example Flexible Vacation Policy

Wondering what a flexible vacation policy would look like in practice? Here’s an example of how this can play out:

Let's say TechCorp is a medium-sized tech company with 150 employees. After struggling with a high employee attrition rate, HR leaders at TechCorp decided to implement a flexible vacation policy to boost morale.

They started by offering floating holidays on top of their standard PTO package and received positive feedback from team members. After a year, they decided to switch to a form of DTO. But due to high production demands and a small staff size, they worried about offering unlimited time off. They implemented a shared scheduling system for employees to claim time off when they needed it, while ensuring there were always enough staff members on-site to meet demands.

The scheduling system encouraged employees to communicate with each other about their time off needs, share workloads, and plan vacation time far in advance. The result was reduced absenteeism at TechCorp and a communicative, positive work culture.

Sample Flexible Vacation Policy

At [Company Name], we believe in empowering our employees to find a healthy balance between their work and personal lives. Our Flexible Vacation Policy is designed to give you the freedom to take time off when you need it, without the constraints of traditional vacation limits. This policy promotes well-being, prevents burnout, and encourages productivity by allowing employees to recharge as necessary.

Eligibility
All full-time employees are eligible for our flexible vacation policy. Part-time employees may be eligible for prorated vacation time, depending on their work schedules.

How It Works

Requesting Time Off: Employees are encouraged to take vacation time in coordination with their team’s workload. To ensure smooth operations, vacation requests should be submitted to your manager at least [two weeks] in advance for planned vacations.
Approval Process: Managers will review requests based on business needs and workload. While we aim to approve all reasonable requests, we also need to ensure that time off doesn’t negatively impact team performance.
No Set Limits: Instead of an annual cap on vacation days, this policy offers flexibility to take the time you need, when you need it. We trust you to manage your time responsibly while meeting the demands of your role.

Guidelines

Balance Is Key: We encourage all employees to use vacation time throughout the year. Taking time off is important for maintaining your health, wellbeing, and productivity.
Communication: Be sure to communicate with your team and provide sufficient notice when taking time off to ensure that projects and responsibilities are properly managed in your absence.
Minimum Usage: To encourage time off, we recommend that employees take at least [10] days off annually. This helps promote work-life wellnessand reduces the risk of burnout.

Exceptions
There may be times, such as during critical business periods, when vacation requests may need to be rescheduled or adjusted. We appreciate your flexibility and understanding in these situations.

Tracking Time Off
Although there are no set limits, managers and HR will track vacation usage to ensure fair and reasonable use of this policy. Should any employee fail to manage their time responsibly or take an excessive amount of vacation, a discussion will be held to address the situation.

Implementing a Successful Flexible Vacation Policy, Step by Step

Step 1: Define Your Policy Goals and Scope

Start by pinpointing exactly what you want this policy to accomplish. Do you aim to help employees recharge, reduce burnout, or make your company the ultimate place to work? Establishing a clear purpose infuses your policy with meaning. Knowing why this policy exists will guide every decision you make—and ensure it becomes a real game-changer for your team.

Step 2: Rally Your Key Stakeholders

Bring HR, legal, finance, and department heads together to create a shared vision. Collaborate to spot challenges, brainstorm solutions, and ensure every perspective is heard. Getting buy-in from the start not only makes for a smoother launch but also builds a coalition of champions who are excited to see this policy thrive. Each voice adds strength and insight that leads to a better outcome.

Step 3: Get Inspired—Benchmark the Best

Research industry leaders and similar companies that have flexible vacation policies. What’s working for them? What could you make even better?

Benchmarking is your chance to elevate your policy from good to great! Learn from others, avoid common pitfalls, and take inspiration to make your policy stand out in a competitive market.

Step 4: Develop Clear Guidelines and Eligibility Criteria

Craft specific, user-friendly guidelines that cover everything: How to request time off, eligibility, any blackout dates, and how vacation balances will work.

Clarity breeds confidence. When everyone knows exactly how the policy works, they’re more likely to embrace it with enthusiasm. Plus, transparency shows that this policy is built with them in mind!

Step 5: Pilot the Policy with a Test Group

If you want, you can kick things off with a small, diverse group of employees to pilot the program. Check in with them, gather feedback, and track the impact. A pilot is a powerful way to test-drive your policy, see it in action, and gather real-world insights. This feedback will make the final rollout even more impactful, helping you iron out the details before launch.

Step 6: Train Managers on Policy Application and Communication

Train managers to communicate and apply the policy consistently. Give them tools like FAQs, scenarios, and practice scripts to address questions with confidence. Managers are the face of this policy. Equipping them with everything they need means they can be true champions for your policy, creating excitement and fostering a supportive, flexible culture.

Step 7: Launch a Company-Wide Communication Campaign

It’s go time! Launch your policy with a bang using emails, Q&A sessions, webinars, and even posters around the office. Make sure everyone knows about this fantastic new benefit and how to use it. A coordinated, lively launch gets everyone on board and excited. The more touch points you create, the more confident employees will feel about using the policy from day one.

Step 8: Monitor Usage and Gather Ongoing Feedback

As time goes on, track metrics like policy utilization, employee satisfaction, and any operational adjustments. Gather feedback regularly to see how it’s landing and where it could improve. Real-time insights let you adapt the policy to better serve employees. It also sends a message: “We’re listening, and we’re here to make this work for you!”

Step 9: Refine and Adjust the Policy Based on Data

After a few months, review the data and feedback. Make any adjustments needed and communicate updates clearly. Celebrate successes and use insights to keep momentum strong. Showing flexibility and commitment to improvement creates a win-win culture! Your policy will stay effective and meaningful, and employees will feel the impact of a company that truly supports their wellbeing.

Launching a flexible vacation policy can be the spark that ignites a happier, healthier, and more engaged workforce. With each step, you’re not just rolling out a policy—you’re creating an environment where people can truly thrive! And that’s something worth celebrating.

Addressing Potential Challenges

Flexible vacation policies offer tons of benefits for your businesses, but they aren’t foolproof. Careful planning, review, and adjustments are necessary to meet challenges. When planning your new policy, a few potential challenges you’ll want to address include:

Understaffing: A solution like the requesting process described in the example above can help you avoid too many employees taking time off at once.
Ensuring fairness: Employees who have been with your business for a while might complain about losing their accrued PTO when switching to a new system. You may offer to pay out their accrued time or allow them to keep the time on top of your new policy’s available vacation days.
Abusing the system: Have steps in place to prevent system abuse, such as requiring time off requests in advance or limiting the number of days in a row each employee can take.

Flexible Vacation Policies KPIs to Track

To ensure your flexible vacation policy is working for everyone, you’ll want to keep track of these essential KPIs:

Employee satisfaction: Employee satisfaction measures how content employees are with their job and benefits. As a KPI for flexible vacation policies, rising satisfaction scores from surveys or feedback indicate employees appreciate the freedom to manage their time off, contributing to their well-being.
Productivity: Employee output is critical for any organization. For flexible vacation policies, consistent or improved productivity after time off shows employees are using breaks effectively to recharge and maintain focus.
Absenteeism: A flexible vacation policy aims to reduce burnout and unplanned, stress-related absences. A decrease in unplanned absences suggests employees are taking proactive time off, leading to better attendance.
Employee retention: This metric reflects how long employees stay with a company. A flexible vacation policy can enhance retention by offering a desirable benefit. Improved retention rates indicate employees value the policy and are more likely to remain with the company.
Workplace conflicts: Tensions between employees or with management are bad for business. As a KPI, fewer conflicts after implementing a flexible vacation policy suggests employees are experiencing less stress and improved team dynamics, reducing tension in the workplace.

Don’t hesitate to ask your team members for direct feedback on the new policy. If you find that your initial goals for the policy aren’t being met, you may need to make changes or address some of the challenges listed above.

Foster a Positive Work Experience With Flexible Vacations

Flexible vacation policies give your employees the freedom to take time off when they need it. They can help boost employee morale, make your business more attractive to talented applicants, reduce absenteeism, and support retention. What a powerhouse!

But flexible vacation time is just one part of creating a thriving work culture. Other HR initiatives and valuable employee benefits will help keep your employees happy and engaged for the long term. One of those benefits is a great employee wellness program. Wellness initiatives drive better engagement and productivity, helping your team members balance their work and personal lives.

Want to learn more about the benefits of work-life wellness? Speak with a Wellhub Wellbeing Specialist today to get started.