PTO Hours: Everything You Need to Know
PTO means "paid time off" and references time off that employees are entitled to for vacation or to manage their personal responsibilities.4 min read
2. Characteristics of and Issues With PTO
2.1. Advantages of a PTO Scheme2.2. Disadvantages of a PTO Scheme3. Manage the Issue of PTO
PTO Hours: Everything You Need to Know
PTO means "paid time off" and references time off that employees are entitled to for vacation or to manage their personal responsibilities. If a company wishes to do so, they can introduce a PTO scheme in place of the typical breakdown of absence days allocated by U.S. employers in order to provide their employees with more freedom. Typically, an employer will credit further hours to this allocation within every pay period. This article will cover everything you need to know about PTO.
The majority of employers in the U.S. provide their staff with two weeks paid vacation time, 10 days of paid holidays, two personal days, up to eight sick days each year. If a PTO scheme is available, this allocation will differ slightly, and the workers will typically be allocated with 30 days of time off instead (the sum of all of the typical paid vacation and sick days to be used as the employee wishes).
The additional paid days out of office that each individual would gain as part of a PTO scheme varies depending on the pay periods the company works by. For example, if an employee is paid according to a bi-weekly schedule (i.e.,, they receive 26 pay periods in any one year), each individual would gain an extra 1.3 days of PTO for every two weeks that they work at the company. Alternatively, if the employer uses a semi-monthly pay system (i.e.,, twice monthly pay packets), each employee would accrue an additional 1.25 days of PTO at each occurrence of the 24 pay periods per year.
As standard, most companies provide their employees with paid vacation breaks according to their years of service. These are usually broken down as:
- One year at the company – 10 vacation days
- Five years at the company – 15 vacation days
- 10 years at the company – 18 vacation days
- 15 years at the company – 20 vacation days
The number of vacation days offered will rarely exceed 20-25 days, but this varies depending on the employer. The allocation offered to each employee can vary depending on their hire date and anniversary.
PTO policies can exist in both for-profit and nonprofit companies, the latter of which decided to introduce these as recently as 10 years ago to deter employees from taking days off.
Characteristics of and Issues With PTO
In a PTO scheme, an employee's personal, sick, and vacation time will be combined into one pot of paid days to take off from work. When an employee takes a day off, regardless of the reason for it, it is deducted from this allocation.
Advantages of a PTO Scheme
There are numerous benefits to this type of scheme such as:
- It deters employees from taking sick days purely to use up their allowance.
- It may work out that employees take less time off from the workplace overall as they are not certain of their entitlements.
- Since employers are just managing one allowance figure, rather than separate allowances against different purposes per employee (i.e. sick, vacation, etc.), then some of the administrative and tracking times and associated costs are reduced.
- Employees have more freedom to use their allowance as they wish.
- Employers receive more notice about planned absences from work, so this enables them to manage workload and staff more effectively.
- The flexibility of time off from work makes the employer seem like an even more attractive workplace for new candidates.
Disadvantages of a PTO Scheme
Although there are benefits to utilizing a PTO scheme, there are also some concerns for employers which are summarized below.
- If employees do not utilize all of their allowance, paying out the monetary equivalent for their time off entitlement can be expensive.
- The associated banking liability increases as employees receive pay raises.
- Any changes in the policy and the number of days employees are entitled to can negatively impact the morale within the company.
- Some states may face issues due to conflicting state laws and policies.
- As the entitlement depends on the employee's start date, those who are new to the company may find that their allowance is not sufficient to cover their planned vacations, especially if they were hired within the final few months of the year.
- The company will have to consider introducing some form of clause which states that their employees must hold back a certain number of days for public holidays (i.e. Thanksgiving and Christmas).
- Although an employee may specify to their employer why they want to take time off, they are under no obligation to give details of the reason as to why they will be out of the office. This is a cause for concern for some who consider that this may open the door to abuse.
Manage the Issue of PTO
PTO is not a policy that will suit every company, so before it is introduced, a company should consider whether or not it fits with their culture. A company with a high degree of flexibility will be the best type suited to this type of program.
If a PTO scheme is introduced, the employee must always notify the employer of their intended absence in advance, except in emergency situations.
For further reading, visit the U.S. Department of Labor's website to understand standard policies surrounding annual leave, sick pay, etc.
If you are currently in the process of introducing a PTO scheme into your company, or you are considering doing so and need any further advice, you can post your legal need on UpCounsel's Marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site, and they come from law schools such as Harvard Law or Yale. Our lawyers have an average of 14 years of legal experience, which includes working with prestigious companies like Google and Airbnb. For the latest legal news and further information on running your business smarter, you can view the UpCounsel legal blog.