What Is Flexible Time Off and How Does It Work?

As a small business owner, you’re not federally mandated to give your employees paid time off (PTO). 

But just because you don’t have to provide PTO for your team doesn’t mean you shouldn’t think about it; PTO is an important part of employee benefits packages—and can help your business attract and retain top talent.

Traditionally, PTO gives eligible employees a limited number of days they can take off from work while still getting paid. However, with changing employment trends (like work-from-home) and the need for small businesses to become more competitive, PTO policies have evolved to help employees strike better work-life balances and benefit your business at the same time.

And one of the ways PTO is evolving? Flexible time off.

Flexible time off (also known as FTO) is an evolution of PTO that gives employees better control over their time off. But how does it work? Is it worth it? And how can you implement an effective FTO policy?

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What Is Flexible Time Off?

Flexible time off is a type of PTO policy that lets your employees take time off when they need it and for whatever purpose they want. 

So how is that different than your traditional PTO policy? Usually, PTO requires employees to earn or accrue time off based on their length of employment. For example, an employee might earn two weeks of vacation and five sick days after a year of employment. Employees might also need to “use it or lose it,” with PTO benefits expiring at the end of the year if they go unused or aren’t bought back.

With flexible paid time off, employees don’t usually have to accrue vacation time. They get a defined number of days off overall, which they can use for sick days, mental health days, vacation days, personal days, or something else.

For example, if you have a flexible time off policy that gives employees a total of two weeks off, any team member (even one who has been there less than a year) could use those entire two weeks for personal days. Sometimes, this type of policy is referred to as flexible PTO.

Differences Between Flexible Time Off and Unlimited Time Off

Unlimited time off (UTO), also known as unlimited paid time off (or unlimited PTO), is a type of FTO, though it’s not exactly the same. As its name implies, an unlimited employee leave policy gives employees a limitless number of vacation days and sick leave, allowing them to take off as much time as they’d like.

In contrast, FTO still caps an employee’s available time off; it just gives them full control over how to use those days. 

How Does Flexible Time Off Work?

For the most part, flex time works the same as any other type of PTO:

1. An employee requests time off. 
2. A decision is made based on business needs—and from there, the request is either approved or denied.
3. If approved, the amount of time off is deducted from the employee’s total allotted PTO.

Again, unlike PTO, the flex time provided can be used for any reason; employees don’t need to make their case or worry about arbitrary caps on different reasons for requesting time off (for example, only having a certain number of sick days vs. vacation days). This simplifies the entire PTO process for both parties.

Additionally, FTO doesn’t typically roll over from year to year; instead, each employee is given a set amount of time that they can take off over the course of a year. And because it isn’t “earned” like PTO, employers generally don’t pay out unused FTO at the end of the year or when an employee quits or gets terminated. 

Pros of Flexible Time Off

Is a flexible time off policy the right fit for your business and employees? Let’s look at some of the benefits of flexible time off:

1. Your Business Becomes More Competitive on the Job Market

If you want your business to stay competitive, you need to attract top talent. And if you want to attract top talent? Offering a generous flex time package is a great way to do it.

A 2021 survey revealed that paid time off is the most desired employee benefit, followed immediately by flexible work options. And so, including perks like flexible PTO in your compensation package can help to set your business apart from competitors—and attract the talent you need to take your business to the next level.

2. Increased Support for Diversity and Inclusion

Flexible PTO can help your business better accommodate the diversity of its workforce—which is becoming more diverse overall. For example, giving your team members the freedom to take off different religious and national holidays—holidays that not everyone might celebrate—can create a better and more inclusive work environment that celebrates and supports diversity while making your business more likely to financially outperform its competitors. 

3. Can Help Employers Save Money

Flexible time away is not usually payable to employees when they leave. That's different than the typical PTO policy where employees earn days off and get paid out for the time they never took if they leave the company. With FTO, however, you can save all that money you'd otherwise spend paying out PTO and use it for other benefits or to invest in new equipment, team members, software, or anything else!

4. Better Work-Life Balance and Employee Wellness

For many employees, striking a good work-life balance is one of the most important aspects of a job, resulting in improved job satisfaction, higher retention, and better employee well-being.

Flexible PTO lets your staff decide when their work-life balance is out of sync. And, if and when it is, this PTO structure gives them the flexibility to take time off to spend time with family, pursue professional development, or simply relax.

5. Fewer Administrative Tasks

Managing employee benefits can be time-consuming—especially if you offer different compensation packages to part-time and full-time employees. With a typical PTO policy, human resources needs to track each employee’s available sick time, vacation time, personal days, and floating holidays, as well as their accrued PTO and accrual period—which can differ from person to person.

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On the other hand, flexible PTO is exactly that: flexible. Each worker is given a set number of days to take off—no categories (like sick vs. personal) are necessary. So, instead of tracking a ton of PTO-related logistics, management is limited to tracking the total available FTO for each employee (plus any other restrictions you implement, such as maximum PTO per month or quarter). 

You can also avoid the pitfalls of managing a traditional PTO policy, like rolling over PTO and handling buybacks—an option that allows employees to sell unused PTO to the company in exchange for cash.

6. Improved Productivity

Employee burnout—from excessive workloads, strict schedules, and lack of time off—can lead to issues like absenteeism, lower engagement, and decreased productivity. Though it might seem counter-productive, research suggests that taking time away from work (for example, taking a vacation) drives employee engagement and improves performance and productivity while employees are at work.

FTO allows employees to prioritize time off and take the vacation or personal time they need to be their most engaged and productive selves.

Cons of Flexible Time Off

Flexible time off has plenty of benefits—but it also has some potential drawbacks. Before you implement a flexible time off policy, some potential cons you’ll want to consider:

1. Scheduling Conflicts

Flexible PTO policies can open the door to scheduling conflicts, which can lead to staffing issues. For example, multiple employees might try to schedule vacation time around long weekends or popular holidays like the Fourth of July. 

2. Unused FTO

Workers are often hesitant to take time off. And when their PTO is flexible, some may be less likely to take the time off they need, increasing the risk of burnout. 

3. Employee Confusion

Classic PTO is easy for employees to understand since it’s so commonly used: X sick days, Y personal days, and Z vacation days. Because FTO is less common, some workers might not fully grasp how it works, which can result in some taking too much—or too little—time off.

Tips for Making FTO Work for Your Business

Creating a flex time policy is only the first step; from there, you have to implement it. For any new changes to be effective, some steps you’ll want to take include:

1. Set Clear Expectations

Proactive management of FTO can help avoid scheduling conflicts, misuse of days off, and confusion over how the policy works.

Set clear expectations and rules that define:

• Who qualifies for this type of leave (part-time, full-time, or both)
• How many days of FTO are allocated—and if it can be used for half-days
• Procedures for requesting time off, including how much advance notification you require
• Limitations and restrictions on requesting a day off
• How is it tracked
• What to do with previously accrued PTO (from a legacy policy when applicable)
• Compliance with state and local laws and regulations

2. And Make Sure They’re Understood

Simply creating a policy isn’t enough; you need to make sure your staff understands it, how it affects them, and how to use it. Conduct meetings to go over your policy and expectations. 

Dedicate time for employees to raise questions or voice concerns and make sure your team is on the same page. Include your FTO policy in your interview and onboarding processes. Add it to your employee handbook and have employees sign off that they understand the policy.

3. Honor the Policy

Employees are often surprisingly hesitant to take time off, so it’s important that you honor their requests as best as possible. Approve time off if it falls within the structure of your policy and stress the importance and benefits of PTO for achieving a healthy work-life balance.

If necessary, consider strongly encouraging employees to take time off to ensure their time isn’t going unused and to demonstrate your commitment to their health and well-being.

Frequently Asked Questions About Flexible Time Off

Still have questions about flex time? Let’s look at a few frequently asked questions.

Is Flexible Time Off a Good Thing?

Yes, it can make your business more competitive on the job market and give your employees more freedom and control over their schedules. This added flexibility, however, can come with some downsides, like scheduling conflicts when too many employees want to take the same days off.

Is FTO Better than PTO?

It’s better than traditional PTO in the sense that it’s easier for your human resources team to track and manage. They won’t have to bucket days off into vacation, sick or personal leave time. Employees will also like the freedom to choose when and how they spend their days off. 

With traditional PTO, employees might be tempted to use days off for activities that don’t fall within the specified buckets (like using a sick day to take a much-needed personal day off), which doesn’t make anyone feel good.

Is Flexible Time Off the Same as Unlimited Time Off?

No. Flex time gives employees control over their schedules and days off, but their available time off can still be capped at an allotted number of days. Unlimited time off is a type of FTO in which employees aren’t subject to any cap on available time off.

Use Flexible Time Off to Simplify PTO

Paid time off is an important employee benefit that pays workers for qualifying personal and sick days, bereavement, and vacation days. But managing PTO can be a headache for many small businesses.

Flex time gives your employees control over their days off without compromising the needs of your company—and all with less work for your administrative team. So, if you’ve decided FTO is right for you, all that’s left to do? Get out there and create your policy!

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