FTO vs. PTO: What’s the Difference?

Vacation time, sick leave, mental health days, public holidays, “my kid’s sick and needs to stay home from school” days… There are plenty of reasons an employee might want to take a day off, and your PTO policy makes it all possible.

As the world of work evolves, so too are time off policies — and the latest buzzwords you need to know are flexible and unlimited.

Companies are increasingly offering flexible time off or unlimited time off to attract and retain their employees. Let’s dive into each type of time off, and how to choose a policy that works for your business.

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What is Flexible Time Off?

Flexible time off (FTO) is a type of time off that allows employees to take days off without a predetermined allocation for how or when they can be used. This time off can be paid or unpaid, depending on the company’s policy.

FTO lets companies combine different types of paid leave allowances into one policy. Instead of, for example, offering three sick days and 10 vacation days, a company might offer 20 days of FTO per year, which can be used for vacation, sick time,mental health days, or personal days.

Companies that offer flexible time off might describe their FTO policy slightly differently. Other ways to refer to FTO include:

• Flexible PTO
• Flexible paid time off
• Flexible vacation
• Flex PTO
• Discretionary PTO
• Open vacation policy
• Unrestricted time off

Flexible Time Off Vs. Paid Time Off: What’s the Difference?

Paid time off (PTO) is time a worker is compensated even though they are absent from work. Flexible time off may be paid or unpaid, as the phrase refers to plans that let employees take time off when for the reasons they choose, rather than having the days be allocated by sick days, vacation days, etc. 

An FTO plan could include both unpaid and paid time off. A company might, for example, offer 20 paid vacation days while offering unpaid FTO for sick and personal days.

How Does Unlimited PTO Fit Within a FTO Policy?

Unlimited PTO is one version of a flexible time off policy where all time off is paid and there is no limit on the number of days an employee can take off in the year.

Despite the word “unlimited,” this PTO policy isn’t a free-for-all. The best practices for this time-off approach are currently evolving, but companies offering uncapped time off typically have requirements for employees to follow, like submitting time off requests to managers and meeting team deadlines. It’s a great fit for some companies, while others find the structure offered by a generous (but capped) PTO policy works better for their employees. The optimal blend of flexibility and structure will vary between organizations.  

The Advantages of Flex PTO Versus Traditional PTO

Flex PTO shows trust in your team members. It lets your employees know you believe in their time management skills, and have faith they will properly manage their calendar without oversight. 

Supports Employee Wellbeing

One employee may need to unwind on vacation, another would benefit from additional mental health days, and yet another needs extra sick days to take care of a child. Flexible time off allows team members to take time off in a way that fits their life. This reduces stress by eliminating concerns that, for example, they are out of sick days before school re-starts in September. This flexibility can help keep employees healthy and reduce levels of stress and burnout in the team. 

Attracts Top Talent and Improves Retention

Salary isn’t the only thing employees care about—their own wellness is also vital. Many are looking to support their wellbeing with flexible work arrangements. And since not every company offers a flexible time off plan, this type of policy can help with talent acquisition.

A generous leave policy may also bolster your employee retention efforts. Career Arc’s Future of Recruiting study found that a “flexible workplace” is a top reason employees want to stay at their current job. 

Challenges of Flex PTO Versus Traditional PTO

A flexible policy can feel like a big shift from a traditional approach to paid time off. It helps to identify potential hurdles and how to overcome them before rolling out your new time off rules. 

Overuse

If a company offers 20 days of FTO, what’s to stop one team member using all of their 20 days in a row for a Bali vacation, leaving their team members to pick up the slack? This would cause productivity to decrease and morale to suffer among other team members.

This is where an approvals process is key. Just because the use of days off unstructured does not mean employees can take time off whenever they feel like or the drop of a hat. Requiring managers to approve requests ensures any time taken off is reasonable without negatively impacting the business or team. 

Calendar Management

Flexible paid time off policies can have additional scheduling considerations. Without a hard definition of “too many” vacation days or sick days, managers need different tools to evaluate time-off requests. 

There are several ways you can plan for overcoming this hurdle. One option is company-wide “no time off” blocks, such as during a high season or in the week before a major deliverable. This strategy does not restrict how many days people take off, but when they can take off to ensure employees are there when needed the most. Another option is to have time-off requests fed into a team-wide calendar so a manager can quickly assess if approving a new request would leave the department short staffed.

FTO is Changing PTO 

When it comes to choosing a time off policy, it’s important to balance the needs of your employees and the company. You have to consider what will work best for both parties in terms of productivity, morale, and cost-effectiveness. More and more, companies are finding a flexible time off policy fits the increasingly flexible world of work.

Time off is an important part of your benefits package, but it’s not the only way to support your employees. If you’re interested in learning how you can implement a comprehensive benefits program and increase employee work-life wellness, talk to a Wellbeing Specialist today!

References

• We tried unlimited holiday for three years. Here’s everything that went wrong. Charlie HR. Accessed January 25, 2023 from https://www.charliehr.com/blog/we-tried-unlimited-holiday-heres-everything-that-went-wrong/
• 2021 Future of Recruiting Study. Career Arc. Accessed January 25, 2023 from https://explore.careerarc.com/future-of-recruiting?mkt_tok=MjYyLUlDTC04MjgAAAGETXrR2UW5eM5WL60iL6y26oPaeLMb2gv6MpqiTKYZu7oyZjIvYRnJ1vqGnX0K93eoR35t9EcLk5m8NRJFvQNDi8o5OJXOedkzq4QfUv1J9o_iAQ#page=1
• Romolini, Jennifer, Like a Boss: “How do I handle a member of my team who abuses our unlimited PTO policy?” Lattice, Published December 19, 2019. Accessed February 9, 2023 from https://lattice.com/library/like-a-boss-how-do-i-handle-a-member-of-my-team-who-abuses-our-unlimited-pto-policy 

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Key Terms:

What is an Employee Leave of Absence?
There are two main leave of absence (LOA) categories: mandatory and voluntary. Mandatory leaves of absence are situations when the employee has a right to take leave, per federal standards. A voluntary leave of absence is an employee benefit or perk. Read More.

Mental Health Days at Work
A mental health day is a day off from work, taken to prioritize mental well-being and reduce stress. It's about recognizing the need for a break to recharge and prevent burnout. Read More.

Unlimited PTO: What is it?
Unlimited PTO is a company policy that lets employees take as much paid time off as they want so long as they get their work done. This policy gives employees more control over their schedules than the traditional 9-5. Read More.

What is a Sabbatical?
A sabbatical is an extended paid break from work, typically six to 12 months in duration, granted to employees periodically throughout their career. During this time, employees are relieved of their regular job responsibilities. They take time to rest, recharge, and pursue personal or professional development opportunities. Read More.

What is a Floating Holiday?
A floating holiday is a type of paid time off that allows employees to choose when they take a day off within a certain timeframe, rather than being tied to fixed, predetermined holidays. Read More.