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A Quick Guide to PTO and Holidays for Startups

Jul 11, 2021| Reading time: 5min

BY Alex Hilleary

Principal Content Marketing Manager

A clearly defined PTO and holiday structure is essential for any company.

It seems simple, but it’s a big decision. 

The second you put a policy down on paper, you’ve defined a key part of your workplace culture for years to come. That’s because the policies you put in place will have a significant impact on the lives of your employees and determine what kinds of people you attract.

This is especially true among startups who are first defining PTO and holiday policies and are building culture from the ground up.

Here’s a look at what you need to consider.

Why Startups Should Care About PTO and Holidays

1. To Prevent Employee Burnout

People are the most important part of any business – especially when it comes to growing and innovating a young company – and you need to make sure your people are supported so that they can bring their best selves to work.

However, the key to success with your people isn’t hours worked, but rather output created.

And for knowledge workers – especially those at startups who make critical decisions – “busyness” is not the goal. You need to create an environment where your employees can maximize their creative output and problem-solving to help the company reach new milestones.

Creating a culture where people don’t take time off leads to burnout, which reduces productivity. Ultimately, burnout leads to turnover of the employees you worked hard to attract.

2. To Attract Top Talent

Unlimited PTO, fancy snacks, beer kegs, you name it – it all came from the startup world trying to find ways to obtain the talent edge.

Startups tend to have cutting-edge perks because these benefits help them compete with larger companies for great people.

As a startup, you’re competing for talent not only with other startups, but also with big tech and other well-funded companies. While you may not be able to match a competitor’s salaries, you can make up for it with a more inclusive and flexible work schedule.

Three Ways to Structure PTO

1. Traditional PTO

Before 2010, there was one main way to do PTO. With a traditional PTO structure, a company sets a certain number of days that an employee can take off each year. Employees schedule vacations and days off accordingly. The majority of companies still use this model. But there are a few variations to it, which include:

  • Giving all of the days upfront when an employee starts
  • Having employees accrue days each month (e.g. they get two days each month and may or may not have a maximum number of days they can carry at any time)
  • Offering sick days (e.g. every employee gets 14 days off and five sick days)

2. Unlimited PTO

First introduced by Netflix, the unlimited PTO model became popular with startups throughout the 2010s. An unlimited PTO policy is a hands-off approach where you trust your employees to take the time they need while also getting their work done.

You hold employees accountable based on their output and contributions, rather than on the number of days they sit in the office or turn on Slack.

But in the past few years, there has been a pushback against unlimited PTO. Critics note that unlimited PTO often creates the reverse effect that it was intended to. Since there is no standard for the number of days off, employees take less vacation, so it doesn’t look like they are abusing the policy.

3. Mandatory PTO

Mandatory PTO arose to make up for the perceived gaps in unlimited PTO. PTO remains unlimited, but employees are required to cash in a certain amount of days off each year.

Managers and People Ops folks check in throughout the year to ensure that employees are taking their allotted time off.

The Five Ways to Structure Holidays

1. Local Holidays (for HQ)

As with PTO, there is a default way to structure holidays. You can opt for the federal guidelines of the home country where your company is located.

In the United States, the federal holiday schedule includes:

  • New Year’s Day
  • MLK Day
  • President’s Day
  • Memorial Day
  • Juneeteenth
  • Independence Day
  • Labor Day
  • Veterans Day
  • Thanksgiving Day
  • Christmas Day

2. Local Holidays (for each office)

For teams with offices in different countries, it’s common for each office to recognize its own country’s holidays.

3. Global Holidays

But as more companies hire remote employees across the globe, many distributed teams are opting for global holidays.

With global holidays, you select certain holidays that people might celebrate worldwide – for instance, Christmas and New Year’s Day – and leave national holidays as days that employees should take off as part of their PTO.

4. Choose Your Own Holidays (on your own)

Another option for distributed teams who want to be extra inclusive is to let employees choose their own holidays.

In this setup, every employee has a certain number of “holiday days off” they can set to honor their regional or religious holidays.

A drawback of this policy is that an employee who decides to work on Christmas or another popular holiday is unable to collaborate with others who choose to take off on that day.

5. Choose Your Own Holidays (part of PTO)

Some companies lump PTO and holidays together in one big package. In this scenario, everyone gets a set number of days off and can apply them to holidays, vacation, or whatever else they want.

Doist, for example, gives its employees 40 days off that they can use for anything.

Choosing Your PTO and Holiday Policy

Ultimately, there’s no right or wrong answer for developing a PTO and holiday policy. It’s about taking into account the type of culture you want to build (e.g. Are you a remote-first international company? A company that prioritizes inclusivity above all else?) and the needs of your employees at the time.

That said, it’s important to note that there are also some legal implications to setting PTO and holiday policies. Every country and state has its own specific rules about holidays and paid time off, so be sure to review the requirements in the areas where your employees are based. If you’re in the United States, you can find state labor laws here.

Once you set a PTO and holiday schedule, it might be hard to amend it. But, like any good People policy, you should revisit it every once in a while to ensure that it still meets your company’s and your employees’ needs.

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