For small businesses, especially those using time clocks, finding the right balance between labor costs and staffing needs can be tough. Voluntary Time Off (VTO) is a smart way to reduce costs during slow periods without losing your skilled team.
When business slows down, instead of layoffs or cutbacks, VTO lets employees take unpaid time off by choice. This keeps your team in place for when things pick up again. It’s a win-win—saving costs now, while staying ready for busy times.
In this blog, we’ll break down what VTO is, its benefits, and how it can help your business stay agile. Keep reading to learn more 👀
What is VTO?
VTO, or Voluntary Time Off, is a company policy wherein employees are allowed to take unpaid time off from work, usually during lean business periods. This helps businesses, especially SMEs to reduce labor costs while maintaining a flexible workforce.
VTO also provides employees with the flexibility to take extra time off without impacting their paid time off (PTO) balance.
Difference between VTO and PTO
Now that we have understood what is VTO, let’s take a look at the key differences between VTO and PTO:
- Compensation: The biggest difference between VTO and PTO is in the compensation, as VTO is unpaid time off, whereas employees continue to receive regular salary when they take a PTO.
- Control: Another crucial difference is that VTO is offered by employers, usually during low-demand periods and employees can choose whether to take it. On the other hand, it is the employees who can choose the time of avail of the PTO, subject to employer approval.
- Availability: VTO is offered during off-peak seasons or slow business periods, whereas accrued PTO is available whenever an employee wants, subject to company policies.
- Accrual: VTO is a temporary option and does not accumulate or require accrual, whereas PTO is accrued according to an employee’s tenure or hours worked.
- Impact on Benefits: VTO can impact time-associated benefits such as overtime as it reduces the hours an employee works. PTO does not generally impact the benefits, as it is paid leave.
Industries that benefit using VTO
Small businesses across industries, including construction, real estate, field service, eCommerce, travel and hospitality, and so forth, use VTO to manage workforce costs during periods of low activity while retaining skilled employees for busier times.
For instance, businesses in the construction industry may offer VTO to temporarily reduce their workforce when the projects are delayed, awaiting permits, or affected by adverse weather conditions.
Companies in the field service industry such as electrical, plumbing, equipment repair etc, may use VTO when there’s a reduction in service calls or during seasons when fewer repairs are needed.
Similarly, in the retail, hospitality and travel, and real estate industries, companies may use VTO to reduce labor costs when transaction volumes are lower.
Benefits of VTO
There are several benefits that VTO offers – both for employers and employees. Some of these include:
- Cost Savings: Helps employers reduce labor costs during slow periods without layoffs.
- Skill Retention: Allows companies to ensure availability of skilled employees when business picks up momentum again.
- Efficiency: Improves operational efficiency by balancing staffing levels with fluctuating business needs and ensuring optimal resource allocation.
- Employee Morale: Offers flexibility that can help boost employee satisfaction and loyalty.
- Flexibility: Allows employees to take time off when needed, without using their paid leave.
The need for a comprehensive VTO policy
Creating a comprehensive VTO policy can prove useful in clearly defining the circumstances under which the VTO is offered, such as low labor requirement, off season period, or low transaction volumes. It can provide the guidance needed on the eligibility, limits on usage, and any impact on work hours or benefits.
A clearly defined VTO policy also helps businesses spell out the processes and procedures for requesting and approving VTO. This helps ensure that the VTO is voluntary and does not impact an employee’s salary, paid leaves, or other benefits.
Balance workforce demands with business needs
Fingercheck’s all-in-one workforce management platform streamlines several tedious HR functions, such as time clocking, payroll, employee scheduling, PTO, VTO, and many more. Our automated systems not only simplify the VTO request and approval process, but also enable businesses to track when employees opt for VTO, ensuring accurate record-keeping of unpaid time off without manual oversight or errors.
By integrating Fingercheck’s VTO management into payroll systems, businesses can automatically adjust for unpaid time off and ensure compliance with compensation rules as well as labor laws regarding hours worked, benefits, and employee rights.
With added-value reporting, businesses can analyze VTO usage trends, gain better understanding of staffing needs, and optimize workforce planning.
Learn more!
