Voluntary time off (VTO) is unpaid, optional leave that employers offer to employees during periods of low business demand. It allows workers to take time off without pay, usually without affecting their employment status or benefits eligibility. Typically, voluntary time off is offered at the employer’s discretion.
What does VTO look like in practice? Say a customer support center sees a dip in ticket volume. The company might invite team members to take a few voluntary days off, allowing the company to manage labor costs without resorting to layoffs or furloughs.
How does VTO work?
VTO policies vary by company and industry. Some organizations allow employees to use unpaid time for personal needs, while others use it purely as an internal cost-saving mechanism.
Here are three characteristics of VTO that distinguish it from paid time off (PTO) and furlough leaves:
- Voluntary. Employees can opt in. They are not required to take the time off.
- Unpaid. Unlike PTO, employees are not compensated during VTO.
- Penalty-free. Voluntary time off does not count against attendance records or job performance.
Note: In many countries, it’s expensive and time-consuming to terminate an employee. Consider that it may be far easier to offer VTO there instead of letting employees go.
When do employers offer VTO?
Organizations offer voluntary time off for a variety of strategic and people-focused reasons. For some, it’s a practical way to manage labor costs and staffing levels during slower periods or economic uncertainty. For others, it’s about giving employees more autonomy over their schedules and maintaining a positive culture—even when business needs fluctuate.
Below are a few common reasons companies across industries choose to offer VTO as part of a flexible workforce strategy:
- To compensate for seasonal slowdowns. When demand dips, like after the holiday rush in retail or between major projects in manufacturing, VTO lets employees take unpaid time off while helping the business control labor costs until workloads rebound.
- To manage overstaffing. VTO helps organizations manage overstaffing by allowing employees to step away voluntarily when more team members are scheduled than needed. This is common in the restaurant industry where more staff are often scheduled for a shift than are needed.
- To reduce costs. VTO can temporarily reduce labor expenses without cutting jobs. It allows companies to stay agile during financial slowdowns while preserving morale and avoiding the long-term disruption of rehiring or retraining when business picks back up.
- To give employees more flexibility. With VTO, talent has the freedom to take unpaid time off without using their accrued PTO or worrying about job security. It’s a practical way for companies to support work-life balance and employee well-being while maintaining stability.
- To respond to unexpected situations. During surprise disruptions, like supply chain delays or project pauses, VTO helps companies act quickly without resorting to layoffs or forced downtime. Employees can take unpaid leave while the business recalibrates operations and prepares for work to resume.
VTO vs. PTO: key differences
While voluntary time off and paid time off might sound similar, they serve very different purposes in a workforce strategy:
- VTO: typically unpaid and used to balance staffing levels or give employees more flexibility during slow periods.
- PTO: a paid benefit that employees earn and use for vacation, illness, or personal needs.
Considering which time off strategy is right for you? Or thinking about blending the two? The table below breaks down these key differences so you can see how each fits into your broader time-off and cost management approach.
| Feature | VTO | PTO |
|---|---|---|
| Compensation | Unpaid | Paid |
| Initiated by | The employer (offered) or Employee (opt-in) | The employee |
| Usage reason | Business need or personal time | Vacation, illness, personal days |
| Impact on benefits | Usually none | None |
| Scheduling | Often driven by employer | Chosen by employee, but subject to employer approval |
Why companies use VTO
When designed thoughtfully, a VTO program can create mutual value for both employers and employees. It’s best to think of voluntary time off as a lever for building a more resilient, people-centered organization, not just a blunt cost-saving scalpel.
For employers
VTO is crucial for organizations that need to reduce short-term labor costs without the long-term consequences of furloughs or layoffs. It allows teams to adjust staffing levels more efficiently, especially during periods of low demand, such as the January doldrums that annually plague the retail sector.
Beyond cost management, offering VTO can potentially strengthen employee loyalty and retention. Committing to keeping your people employed (in busy seasons and slow) shows them that they are valuable. Per a Gallup survey, there are numerous reasons why employees leave an organization for greener pastures, but seeking novel solutions to prevent layoffs or furloughs isn’t one of them—especially if such efforts are well-communicated.
For employees
On the employee side, VTO allows employees to keep their jobs even during periods of less work. That, in and of itself, is huge.
It also provides much-appreciated flexibility for addressing personal needs, like travel, caregiving, or simply taking time to rest and recharge. An extensive body of research shows that taking time off from work has numerous data-backed benefits for the employee (and the employer, too).
FAQs
Is VTO mandatory?
No. VTO is entirely optional for employees. It’s offered voluntarily and should not result in penalties if declined.
Does VTO affect benefits or job status?
Typically not, especially for short periods of time. However, extended unpaid leave may impact benefits eligibility depending on the employer’s policy.
Can I use VTO instead of PTO?
You may choose to take VTO if offered, but it is unpaid. Employees usually prefer to use PTO for income protection if offered, unless they want unpaid time off for another reason.
Do all companies offer VTO?
No. VTO is more common in sectors with variable workloads, such as manufacturing, logistics, or customer service. It is not a legal requirement.
How is VTO different from volunteer time off?
Volunteer time off (also abbreviated as VTO) refers to paid time off to volunteer for charitable causes. Voluntary time off refers to unpaid leave offered during low business demand. The two terms should not be confused.
Ready to build a more adaptable, people-first workforce?
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With our Employer of Record (EOR) services, you can hire talent in London or Kuala Lumpur or Lisbon without setting up local entities or worrying about complex labor laws. We handle hiring, onboarding, benefits, and compliance in each country. That way, you can focus on growing your global team while we manage the details that keep you compliant.
Contact us when you’re ready to discuss how we can help you build an adaptable, people-first, and global workforce.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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