What Is Paid Time Off (PTO)

A paid time off (PTO) policy creates a combined number of days that includes vacation time, sick days and personal time allowing employees to use as desired to get paid time off of work. Employees can use this time off at their discretion. Days off are added each pay day by employers.

When an employee wants to take some time off from work, the PTO policy provides a certain amount of the accumulated time off to be paid time off. This policy enables employees to create their own balance between work and life.

Companies can protect the company’s workload, as well as customer service by making it mandatory for employees to give notice two days in advance of the PTO they want. The exception is if the employee is genuinely sick.

Employers should create a complete set of guidelines before adopting a PTO policy. This prevents negative reactions when rules are created after the policy is established.

A PTO policy enables companies to eliminate "sick leave" and "vacations." Many employers have substituted them with "paid time off" (PTO). Although it may seem good at first glance, it could prove costly.

Most employers in the US give their employees 2 weeks for vacation, 10 holidays with pay, two personal days, and 8 sick days each year. With a PTO plan, employees are often given 30 days of paid time off instead. With a bi-weekly schedule for pay (26 pay periods each year), employees get 1.3 days of PTO every two weeks. A pay schedule that is semi-monthly gives employees 1.25 days PTO each pay period.

Advantages of Paid Time Off

By giving employees the discretion when to take time off, they are treated as adults. They also feel that you value them more, which helps ensure employee retention.

Employers like PTO because it lets them have some control over absences that are unscheduled, which can create a problem for many employers. Employees are enabled to schedule some time off in advance which helps ensure work is covered.

Research has revealed that having a PTO policy results in employees taking more vacation time and less sick time. This means that they come back refreshed and ready for work, which does not occur when they take more sick days. They also do not feel the need to lie when they want time off.

Another advantage for employers is that they do not need to keep track of separate days for sickness, vacations, and personal days. Instead, they only need to keep track of the hours used.

Disadvantages of Paid Time Off

When some companies adopt a PTO policy, they give the employees fewer days off than they had before. A Few employers have found that employees tend to abuse the program, looking at all available days off as vacation time. This has led to employees using all their days off prematurely and not saving any for emergencies or for sick days.

The program may also make it harder to rely on some employees because they are more apt to take all their days, which may not have occurred under traditional days off. This could easily create a problem for smaller businesses because they have fewer employees to draw from to replace employees who want more time off.

When an employee is separated from employment where a PTO agreement is in place, some states require that they be paid for each day not used. In states that allow a separation between vacation and sick days, they often only require for employers to pay for unused vacation days.

Paid Time Off vs Overtime Pay

The U.S. House of Representatives has passed a bill that will permit private employers to pay employees that work overtime with paid time off instead of with pay. The problem with this is that when paid with cash, it can be used to buy things like food or clothing, or whatever is needed. It is only right that the paid time off should be able to be converted to cash if desired.

A problem with this is that employees may be required to work overtime hours but will not know how or when they might be paid for it. It also creates a record keeping problem with HR, who will be required to keep track of requested time off, scheduling, and adding extra time off when overtime hours are added. Employees should be paid in cold cash when overtime hours are worked.

Managing the Issues Of Paid Time Off

Employers can use paid time off (PTO) as a powerful tool to recruit and retain employees. Before adding it to your company, be sure it will work with your company’s culture. It is best suited for a company that can be flexible.

Clear guidelines should be put in place, which includes whether or not you want employees to request PTO ahead of time. The exception would be in case of emergencies, but what constitutes an emergency should be defined and then enforced.

When an employee is sick, they need to stay home. This will help to protect other employees when the sickness is contagious.

If you need help in determining if PTO will work for your business, or how to set it up, you can post your legal need on the UpCounsel’s marketplace. UpCounsel only uses the top five percent of lawyers who graduated from law schools such as Harvard Law and Yale Law, and have an average of 14 years of legal experience. Many of them have worked with or on behalf of such companies as Google, Stripe, and Twilio.