Has your business had enough with the headache of tracking the reasons why your employees need to take off from work? You are not alone. A growing number of companies are moving to a paid time off (PTO) system where employees are given a set number of days to manage however they choose.


Sounds good, doesn’t it? A PTO policy gives each employee a pool of days they may use at his or her discretion. If they rarely get sick, they can enjoy more vacation days. If they are very ill and not be able to work, they can take time off without concern.


So, if your employee needs time off for a trip to Bali, a doctor’s appointment, a religious observance, or needs to wait for the plumber, they will be covered by the same policy and are drawing from the same bank of days.


How Are Employees Responding To PTO Policies?

Potential employees are seeking them out. In fact, PTO policies have become an important factor in a job candidate’s initial interest in a job. They are also helping companies to retain employees.


A recent survey of over 2,000 employers from the Society of Human Resource Management (SHRM) reveals that workers today are placing increased importance on flexible scheduling and greater autonomy in managing their time away from the office. The survey, of predominantly private employers with 500 or fewer employees, indicates that 52% of the businesses offer PTO plans to their employees.


Advantages of a Paid Time Off Policy

No More Policing

Managers no longer have to oversee their employees’ time off. Paid time off allows you treat employees as adults who are entitled to use their PTO without oversight.


Easier to Find Coverage

PTO gives the employer more control over unscheduled employee absences, which can be a serious problem in many industries. Finding suitable work coverage becomes easier as employees can schedule time off in advance.



Employees value the flexibility that PTO provides. Whether they need to care for a sick child or to take a vacation with the family at the beach, they can do so without stress.


Less Fake “Sick” Days

TriNet reports that PTO policies reduce the number of “sick” days. When companies have separate sick day policies, healthy employees sometimes create a false situation to use them.


More Days Off Could Mean Lower Salaries

PTO plans are quickly becoming a recruiting tool in some industries. Young employees may be willing to take a lower salary if their overall compensation package includes a generous PTO policy.


Drawbacks of a Paid Time Off Policy

Time Management Issues

Allotting time off for various reasons can become daunting for some employees. Since it can be difficult to plan for how many days you’ll be sick or how many times you’ll need to manage a personal issue, some employees may find it challenging to use their time appropriately.


Too Much Freedom

Some employees may see that they have 20 days of PTO and plan a 20-day vacation. This decision leaves them with no room for unexpected circumstances such as illness or personal issues that may impact them.


Big Payouts For Companies

There is usually some buyout clause in employee contracts. If several employees with large amounts of PTO days leave their job, there may be a significant financial burden on the company to pay them for their unused time off.


Note: If your business has over 50 full-time employees, you are subject to federal and state regulations through the Family and Medical Leave Act (FMLA).


Even if you are not required to provide paid leave, many business owners choose to provide PTO for sick leave, vacations, and other events because it is a great value-added benefit for their employees. It helps in recruiting and retaining top talent.


Steps To Consider When Creating A New PTO Policy

Decide on The Total Number of Days Employees Will Get Off

You want to stay competitive. To determine the appropriate amount of time off you give employees, make sure your PTO program is competitive with other businesses in your industry and your area of the country.


You’ll also need to decide if sick days, personal days, vacation time, National Holidays, bereavement, and volunteerism will all be part of your paid time off policy.


How Will Employees Acquire their PTO?


The amount of PTO employees have increases the more hours/days they work for your company. For example, an employee may earn 8 hours of PTO for every 160 hours or 4 weeks worked.


Flat Rate

Employees have a set amount of PTO per year, such as two weeks, and if someone starts mid-year, the amount is then prorated.


Choose The Type of PTO Plan That Suits Your Business

In addition to accrual versus flat rate, you also need to consider the time period of a PTO policy.


Rollover Plan

In a rollover plan, employees may carry over PTO into a new work anniversary or calendar year. One drawback is that employees can “save” their time off, giving them the option for a very extended vacation. Ask yourself if can your business handle that scenario before implementing a rollover plan.


Use It or Lose It Plan

With this plan, if you don’t use your hours by the end of the year, they are lost, and everyone begins the new year with zero hours. Keep in mind; this approach may prompt high occurrences of end-of-year absenteeism by employees not wishing to lose hours.  


Forced Buy Back Plan

This plan is usually structured in one of two ways. In the first, once the amount of PTO days reaches a certain level employees can cash in some portion of their days earned. In the second, some employers offer to buy back unused PTO days from their employees.


Is Your Policy is Compliant with Federal, State, and Local Laws and Regulations?

Federal, state, or local employment laws may affect the type of policy you offer. Work with an attorney or assign someone to learn these requirements when creating a PTO plan for your company.


Communicate Your Policy Clearly

Once you decide on the PTO plan that best suits your business, it’s important to communicate the policy details to employees. This is done by outlining PTO policies during employee benefits meetings or with clearly worded information in your employee handbook.


Make it Happen

A Glassdoor survey shows the average American employee only takes half of their vacation time, and when they do take paid time off, the majority continues to work.


When you encourage the proper use of paid time off for your employees, they will be more productive. Allowing an employee adequate rest and time attend to personal business is essential for retaining top employees.


Common Questions Asked By Employees About PTO Policies

As with any new policy, your employees will have questions. Make sure all appropriate parties know the details of the new PTO policy and are trained to communicate it effectively and clearly. Typical questions are:


  • What is the number of PTO hours I’m entitled to?
  • What are the methods in which PTO is dispersed?
  • What are the time-off request/approval procedures?
  • What happens to unused time?


Overall, the purpose of paid time off is to give employees flexible time off for vacation, illness, doctor appointments, school, volunteering, and other activities. The company’s goal is to reduce unscheduled absences and the need for supervisory oversight.


As with all HR policies, a select few will abuse the policy. To prevent PTO abuse, ensure that documentation and requests for PTO are followed every time with zero exceptions. If your PTO policy and procedures are firm, less abuse will occur.