If your startup is anything like the ones I work with, the summer can feel like death by a thousand (vacation) cuts – one person is out this week, another the next, and two out for half of August. While we want our teammates to take vacation and get a break, startups are also often constrained on team size, making it hard to support multiple people taking vacation at the same time.
The underlying issue is often that startups offer unlimited paid time off (PTO), a type of PTO policy that does not set a specific limit to the amount of time someone can take off. However, there’s a misconception for leaders around unlimited PTO that it inherently has to be a free for all where teammates can take any day off they want. Simply put, that’s not true. Read on to learn how you can set up a thoughtful unlimited PTO policy that empowers teammates to take time off without crippling your company’s momentum.
Why have an unlimited PTO policy at all?
Many companies solve the problem of PTO by creating a limited PTO policy. These policies set up a specific number of days that teammates can take off each year, e.g., ten days, in addition to company holidays. Sometimes, these policies also require teammates to earn or accrue days of PTO as they work — e.g., one day earned per quarter.
However, for early stage startups, limited PTO policies can create logistical challenges: they require detailed vacation and sick day tracking, plus they require companies to pay out unused vacation days when someone leaves. As a result, startups that are trying to stay flexible and reduce overhead often default to an unlimited PTO policy, which doesn’t require tracking and payment under the law.
What’s the issue?
The problems with unlimited PTO are multifaceted like some teammates struggling to actually take any vacation while others take too much. Many problems also arise from an unfounded belief that unlimited PTO means you cannot place restrictions around it, or that you don’t even need a policy to describe your PTO beyond “unlimited PTO.”
As a result, you see issues crop up like:
Teammates using the policy unevenly – some taking almost no vacation and some taking borderline sabbaticals every few months
Little advance notice or awareness of PTO coming up on the team
Poorly scheduled PTO leading to a fraction of full team capacity for weeks on end
Reluctance to request approval for PTO as the policy is “unlimited”
What’s the solution?
The key to having a successful unlimited PTO policy is exactly that — having a policy. Instead of simply stating that unlimited PTO is the policy, take time to draft a policy that lays out guidelines and processes for taking PTO.
There are three key building blocks to a well thought-out unlimited PTO policy.
Job Requirements: One aspect of unlimited PTO that is poorly understood is that you still have to meet the job requirements for your role. Even if a company has no documented policy in place, taking two weeks off every month would be problematic in that the teammate would not be performing up to the expectations of their role. In this case, the key is to ensure you have documented job descriptions — even if it’s just the original hiring post.
Types of Leave: A common issue with unlimited PTO is when people use it for all kinds of needs – vacation, sickness, family health issue, etc. As you read below, you’ll learn that to make your PTO policy most effective, it’s helpful to outline when it does not apply and what other policies do come into play instead. The most common example of this is having a parental leave policy that is distinct from taking PTO.
Approval: Even when it’s unlimited, your policy should lay out how to request PTO and when approval is required and how it’s determined. Many companies require all PTO — even a day — to be requested and tracked. If your company is on the small side, I think it’s fine to allow one to two day requests to be automatically approved, but if you’re struggling with uneven levels of PTO usage, tracking it would still be helpful.
Now that you’ve got the foundations of a policy, let’s review a few problems that crop up and what you might want to include in a policy to address them.
Problem: Too many people take vacation at the same time, making it hard for the team to get work done.
Small teams are inherently resource constrained. There’s a reason that the federal government does not require small companies to uphold the same leave policies as larger companies — it is significantly more difficult for a team of five to accommodate an absence than a team of fifty or five hundred.
In this case, we’ll want a few things to help manage this:
Require approval for all PTOs greater than two or three days within a month period — this is intended to cover both consecutive days off but also taking a day each week.
Require teammates to share their (approved) OOO in a team calendar such that others can see the time off and plan accordingly. Some HRIS platforms like Gusto do this automatically once a PTO is approved.
Identify for each team what’s the minimum viable team size to keep things moving (i.e., can only one person at a time be out?) This may shift based on seasonality in the business – e.g., for some teams, the minimum viable team size on holidays is quite low whereas for others it requires all hands on deck.
Problem: Teammates are taking too long vacations — e.g., two weeks or more at once.
Views on what amount of PTO is appropriate to take vary widely, particularly across generational and cultural contexts. It’s helpful to set a baseline for teammates, so they know what the norm or expectation is within this company. Legally, with an unlimited PTO policy, you can’t say something like “we expect you to take two weeks,” but you can frame things around ensuring each teammate takes the time they need to be well-rested while meeting the requirements for their role.
To help combat this issue, include the following in your policy:
Require multiple weeks advance approval for more than five consecutive days off. The advance notice helps the team at least plan ahead.
Designate that time off beyond a max duration, like two weeks, is not covered by the PTO policy and is instead covered by the leave policy. You can select this max time by considering what portion of the year someone could be out while still being effective at their job. A leave policy would then allow for medical leave, parental leave, or other situations that the company wants to support. Be sure to check applicable local and state laws regarding what you need to support at a minimum.
Problem: You don’t know when teammates are going to be out.
Sometimes it continually feels like a surprise that someone is going to be out, which can make coordination and planning more difficult.
In this situation, you may want to require approval for all PTOs – even if it’s just one day. That way, at least the manager is aware.
Similar to above, require teammates to share their (approved) OOO in a team calendar.
Review upcoming absences in a team meeting, so everyone is aware.
Problem: PTO is used unevenly across teammates with some teammates taking very little and some taking a lot.
This is one of the big downsides of unlimited PTO generally — some teammates don’t use it. There’s research that having limited PTO can actually encourage folks to take it due to a use it or lose it mindset. Unlimited PTO allows teammates to instead continually push out when they are going to take a vacation.
Due to the legal constraints around unlimited PTO, you cannot set a minimum amount of time that you expect people to take off. Instead, try the following:
Encourage reluctant teammates in 1:1s to take vacation if they’re not already. Consider reviewing their upcoming vacation once a month together.
If you’re concerned by the amount of PTO someone is taking, discuss in their 1:1 the ways in which it’s impacting how they perform their role. E.g., if they’re out once a week, that would really make it difficult for teammates to rely on them.
Role model taking time off yourself. If leaders aren’t taking time, then the team is going to hear a message that it’s not actually okay to take time off no matter what the policy says.
Problem: Teammates are taking time off for a mix of reasons – sickness, vacation, family issues, making it difficult to say no.
Set a policy regarding medical or extended leaves separate from the PTO policy. Clarify in the PTO policy when leave policy kicks in instead: e.g., more than seven days related to the same situation.
Be sure to include a max amount of paid leave someone can take in a year in the policy — whether that is sick leave, parental leave, or another kind.
If you’re still seeing more leave than you would expect, talk to the teammate about the expectations for their role and how their absences are interfering with meeting those expectations.
Each of these problems are real — they’ve happened on teams I’ve worked with, but they’re not impossible to solve, and they can all be addressed with an actual PTO policy. We hope this helps as you scope out your own unlimited PTO policy and deal with empowering small teams to take time off.
If you’d like us to share a template policy in a future newsletter, please comment below!