How Does PTO Work: The Ins and Outs of Paid Time Off

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How Does PTO Work: The Ins and Outs of Paid Time Off

If your business is looking to hire new talent or retain long-term workers, implementing a PTO program may help swing the odds in your favor. While traditional models typically allocated holiday, vacation and sick days separately, modern PTO programs separate holidays from the equation and combine vacation and sick days under an inclusive umbrella.

What does PTO stand for? PTO stands for paid time off. It’s an employees’ paid time off away from their job. Paid time off can refer to vacations, illnesses, holidays and personal days, but PTO days are different from personal, medical or family leave.

Some employers separate vacation and sick pay from PTO programs, while others combine all forms of paid time off into a single plan. These fringe benefit programs may structure the allotment of PTO days in a combination of ways, including by hours worked, seniority or an employee’s role within an organization.

How does PTO work?

PTO day allotment is called accrual, and employees may accrue paid time off in a variety of ways. Typically, employees who have more seniority or hold a higher position within a business have more PTO days than new hires or typical workers.

Some companies provide employees with a set amount of paid time off at the beginning of each calendar year, while others let them build and bank paid time off throughout the year, based on the number of hours worked. In many cases, employees earn a set amount of PTO hours per pay period.

When employees wish to use the PTO days they’ve accrued, they request paid time off from their direct manager or supervisor, usually through a form, email request or self-service online portal. Their superiors then forward that request to human resources, and the PTO days are deducted from the employee’s banked time.

Why Offer Paid Time Off?

At its most basic level, employment is about getting paid to work. Smart businesses don’t pay people for their time, they pay them for their output. Humans have a limited attention span, and they have limited energy reserves. If we don’t replenish those energy reserves from time to time, then our output can drop drastically.

average attention span of a human in 2000 and now versus a fish

More time spent working doesn’t necessarily mean you get more work done. In fact, regular breaks (both short breaks during the day, and longer breaks throughout the year) make people more efficient in the long run.

If your business doesn’t offer PTO, then your employees have less incentive to take the time they need to refresh themselves and maximize their output. Anything you can do to improve your offering benefits your business.

How Do You Define A PTO Policy?

diagram to defining a PTO policy

Take a Tailored Approach

Customizing an employee’s PTO policy is often the best approach, as you can tailor it to their employment type (full-time, part-time, shift worker, etc.) as well as their seniority in the company. The PTO policy for each employee should answer the following questions:

  • How much paid time off can the employee take per year?
  • How many work hours per week is their PTO based on?
  • How will additional hours/overtime worked by the employee impact their PTO?
  • What are the company’s policies for maternity leave, paternity leave, sick leave, compassionate leave, and bereavement leave?
  • Will you implement PTO rollover or a PTO bank? If so, how will it be calculated?
  • Is there a limit to how much PTO can carry over to the next year?
  • What is the minimum PTO required per year (1 hour, half a day, 1 day, etc.)?
  • What is the company’s stance on emergency circumstances and paid (or unpaid) time off?
  • Will they be compensated for their unused PTO if they get let go or laid off?
  • How may their policy change in the future?

Be Clear About PTO

The best PTO policy is one that clearly defines when, how, and for what reasons an employee can take paid time off.

Formalize & Distribute Your PTO Policy

Once you’ve established your company’s PTO policy, immediately add it into your employee onboarding and training documents so it becomes a seamless part of your process. (Psst: If you’re still doing this by hand, we have to tell you — there’s a better, easier way to manage your HR processes. )

If the PTO policy is new, or newly updated, share it with employees — and be open to their feedback. Your policy may change over time as the company and employees’ needs change, adding on to what works and improving what doesn’t.

Report And Track PTO


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