What are the best Paid Time Off (PTO) policies for small businesses?

person on a hammock resting with their feet up during their vacation after implementing the best holiday policies. photo by mateusz dach from pexels

How to choose the best PTO policies for your workplace

There are lots of new holiday policies going around. From unlimited leave to mandatory breaks, are these new PTO policies worth it? How do you know which one is right for your company?

PTO policies are central to company culture and employee retention. So it’s important to choose the right holiday policy for your workplace. You want to make sure that you are providing your employees with enough time to rejuvenate and avoid burnout.

If you’re looking to attract great new hires, generous holiday policies could be the difference between your candidates accepting an opportunity to work with you versus losing out to your competitor.

But how can you trust that your employees won’t abuse generous holiday policies? And how can you make the holiday policy fair so that one colleague isn’t left picking up another’s work?

This blog will give you the low-down on the hottest holiday policies and help you decide which is right for you.

The legal requirements

Whatever PTO policy you choose, it’s important you follow the law.

In the UK, nearly all full-time workers are entitled to 5.6 weeks of paid holiday annually. The entitlement for part-time workers is calculated in proportion to this. So if you worked 3 days a week rather than 5, you would have 3/5×5.6 weeks, or 16.8 days, of PTO a year.

You’ll also need to clarify how much notice your employees will need to give you. You might require 20 days notice for a 10-day break or 21 days for a 7-day break. Whatever you decide, make it clear to your employees.

It’s also a good idea to clarify how you will assign days off at popular times like Christmas and the school break. Normally this is done on a first-come-first-served basis. Just make sure your employees know this so there aren’t any disputes if they can’t get the time off they want!

And make sure your employees know if they are required to work during bank holidays or popular holiday times.

The key to making your PTO policies fair is making sure everyone knows the rules about how they will be assigned. And as long as you are following the legal holiday entitlement you can’t go too far wrong.

But there are still some great PTO policies to give an extra work perk this summer.

Flexible leave policies

Flexible leave is an umbrella term for policies that provide your employees with flexibility.

These policies aren’t limited to PTO. They also include being able to adjust your working hours and arrangements to whatever suits you. This could mean starting later to adjust for the school run or working from home.

But there are also flexible PTO policies you could consider.

black sunglasses on a sandy beach, symbolising an employee enjoying the sun after being granted the best PTO policies at work. photo by ethan robertson from unsplash.

Unlimited Leave

Unlimited leave does exactly what it says on the tin. It’s where employees are able to take as much leave as they wish. And it’s one of the hottest PTO policies at the moment. From Netflix to LinkedIn and GitHub, many companies allow their employees to decide how much time they get off.

This includes sick leave, personal days and vacation days – there really is no limit.

Your employees can still request time off and you can refuse it around certain dates. But the overall number of days an employee could take off doesn’t have a limit.


If you Google a definition of ‘flexi-leave’, you are bound to be confused. It seems like every company that offers flexi-leave creates its own definition.

But from what I understand, flexi-leave is similar to unlimited leave. Employees can decide when they wish to take leave though there might be a limit of the overall number of days you can take. Flexi-leave policies often combine different types of leave, like holiday and sick leave, into one.

Often this gives employees quite a large amount of leave. So while there is a limit, it’s much larger than the standard holiday entitlement. Deloitte is one company that offers flexi-leave and employees can take up to 12 weeks’ leave.

So while flexi-leave has its limits, it still gives employees a lot of freedom in taking leave.

Discretionary leave

Discretionary leave is a similar policy. Employees can still take as much time off as they wish. But it can’t interfere with their regular schedule or cause burdens on their colleagues.

Which leave should you choose?

To you, these flexible leaves might sound incredible or absolutely crazy. If you do decide to consider them, you should consider the challenges they come with.

Your main fear when introducing unlimited leave might be that your employees would never stop taking time off. But companies who have trialled unlimited leave, such as Charlie HR, have said that employees weren’t taking enough time off. One common problem is that employees often apply for fewer days leave as they don’t want to seem lazy.

Charlie HR also found that the policy created inequality between colleagues. If one colleague takes fewer days off than another, they are left catching up on their colleagues’ work. By creating a system where some will take more leave than others, unlimited leave can create inequality and tension between colleagues.

Discretionary leave might be a better option in this case. Still allowing people to take the time off they want as long as it doesn’t negatively impact your colleagues could help keep things fair.

But you’ll still need to decide whether you are offering unlimited paid time off, or unlimited days off. You’ll also need to consider on what basis a manager can refuse time off, and make this clear to your employees.

While there are challenges, flexible leave policies could strengthen the trust between you and your employees. And it’ll give your employees independence and potentially reduce admin tasks.

If you do have a strong bond with your employees, these flexible leave policies might be for you!

woman lying on a sunny white sandy beach with a bright blue hat and deep blue sea in the background, after her work employed the best holiday policies. photo by pixabay from pexels

Other policies

If these policies don’t cut it for you, there’s a range of other PTO and working arrangements you could try to give your employees some time off this summer.

Minimum/mandatory leave

After the kerfuffle over holiday incentives, Buffer introduced a new policy of a minimum amount of leave for each employee. In a similar style, Bumble decided to give all of its employees a week paid holiday to tackle burnout.

Mandatory minimum time off ensures fairness and helps your employees avoid burnout.

But it does carry its challenges – especially if you decide to follow a company-wide break. You could lose business, or have to shut down your entire organisation for the duration. And, you’ll need to figure out some rules around requesting more than the minimum leave.

In some companies, if an employee isn’t using their holiday up throughout the year, their manager schedules some mandatory holiday for them. This makes sure they rest and that the team doesn’t have to try to cover long periods of holiday at the end of the holiday calendar

In some companies, taking leave is considered a matter of security or safety – for example, in jobs where fraud is a serious risk, another person taking over during time off makes it more likely that any irregularities will be discovered because the wrongdoer isn’t there to cover their tracks. Any company stands to benefit from a holiday policy that leads to some rotation of tasks amongst the team.

Shorter working week

We don’t get many sunny days here in the UK, so some workplaces advocate for a shorter summer week to enjoy the sunshine. Whether it’s a four-day week or half-days on Friday, shorter summer weeks can be great for providing an extra boost of morale.

Berlin-based startup Mambu allows its employees to take an extra day during the summer months – on top of their standard 4-day week. Mambu says this helps their employees to maximise productivity when they are at work, working smarter not harder.

As everyone is entitled to the same amount of time off, these policies are fair and equal for everyone. They’re great for parents, who get to spend an extra few hours or day with their children during the school holidays.

But some who have trialled a shorter working week often say that it increases stress towards the end of the week, as there is pressure to complete work in a shorter time frame. But you could decide to alternate days off so someone is always at work.

You’ll also need to decide whether everyone will be off on the same days or if it will be staggered.

If everyone takes Friday off, this could interfere with clients that are still working the standard 5-day week. You could lose out on business or cause conflict with your partners.

And if it’s a summer-only policy, make sure you clearly define when summer starts and ends.

Holiday incentives

One way you could help to encourage your employees to take time off is to introduce holiday incentives.

This is exactly what social media company Buffer did. After fearing their employees weren’t taking enough time off, they introduced a holiday incentive scheme. If you took a holiday you could get a $1000 bonus with an additional $500 for family members or partners.

It’s safe to say the policy worked a bit too well. 80% of team members took a holiday during the incentive scheme, compared to 36% the year before. While it did provide a boost in holiday-taking, the scheme was not sustainable in the long run due to its success.

While financial incentives might be unsustainable, you could offer a softer incentive to take holidays. Some have added an extra vacation day to their employees’ holiday entitlement, provided them with a parking spot or a catered meal.

But if you’re worried that your employees aren’t taking enough time off, you might want to consider trying other things to help them avoid burnout, like hiring!

How to pick the best holiday policies for your work

If you’re thinking of changing your holiday policy, it’s a good idea to run it over with your team first. Everyone has different ideas of what’s nice and different needs when it comes to booking holidays.

If you are worried about a fall in productivity after changing your PTO policy, you could consider hiring someone new to pick up some of the work.

Whatever policy you choose, talk it over with your team first. And make sure your employees are taking enough time out to avoid burning out!