A paid time off (PTO) policy is a relatively new employee benefit in the business world. Fifty years ago, the idea of providing employees with an annual bank of paid days off to use as they wish was unheard of.
Most businesses used traditional vacation-sick-personal day programs, which allow specific time off in each category vs. a PTO plan’s set bank of days per year for qualified employees. Of the two, PTO plans have been gaining in popularity, especially over the past few decades. According to a 2014 WorldatWork survey, PTO program popularity increased from 28% in 2002 to 41% in 2014, while traditional programs declined from 71% to 56% over the same period.
One similarity between the good ol’ days and now: no government intervention. That’s right, there are no federal laws in the U.S. that require employers to provide paid time off work. Compensation for time off, regardless of how it’s managed, is a competitive benefit than can attract and retain employees. The challenge is determining which structure is best for your company.
Should your business shift to a PTO program?
Deciding to move from a traditional time-off plan to a PTO structure requires careful consideration. You should first evaluate your corporate culture to determine if a shift will be met with open arms or resistance. Conducting a cost-benefit analysis is another critical early step. How will your potential PTO plan stack up against the competition? Further still, it’s important to map out how you’ll migrate existing earned vacation and sick time to a new plan.
This homework is worthwhile because the benefits of PTO are plentiful when it’s the right fit. Companies with a paid time off policy report positive results, including:
- Supervisors find PTO tracking easier to administer because they only have to report one type of request — instead of sick days vs. personal days vs. vacation days — and they are more likely to report time off more consistently
- Managers don’t have to navigate the minefield of time-off excuses, eliminating possible legal concerns
- Employees are more likely to give advanced notice for requests since they no longer need to justify the need for paid days off
- PTO is an added benefit for employees who rarely take sick days — they end up with more time off, which is perceived as an incentive and, therefore, a retention tool
- Morale and productivity improve as other employees feel less burdened by last-minute absences
- Employers are better able to plan ahead and avoid scheduling gaps, as well as reduce the cost of hiring temporary workers
- Flexible online tracking services, like TrackSmart Attendance, allow employees to request time off work — and managers to accurately process these request
Clearly state your PTO policy
You and your employees are best served when your PTO plan thoroughly describes what is and isn’t included, and how the program is administered. The following four areas are must-haves for a sound PTO policy:
- Definition. Clearly define what PTO is, what it covers and how it’s tracked. For example:PTO provides eligible employees with paid time off work for vacation, personal time or sick time. No explanation is necessary, and the time can be used however the employee sees fit. When an eligible employee is absent from work for any reason whatsoever, the time is then deducted from the employee’s PTO bank.
- Accrual. If your plan is accrual-based (vs. an annual lump sum), it’s important to explain how PTO is accrued, how soon it can be used and whether or not future hours can be borrowed. For example:PTO may be used as soon as it is accrued. Length of service with the company determines the rate at which eligible employees accrue PTO. With accrual models, you’ll need to define length of service categories (i.e., 1-4 years, 5-9 years, 10-14 years, 15+ years) and, for each service category, include the PTO hour accrual amount per day/week/month, the annual amount and the maximum accrual limit.
- Eligibility. State who PTO is available to and the process for getting approval. For example:Only active, full-time employees are eligible for PTO, and all PTO must be earned before being taken. Managers reserve the right not to approve a request for PTO if it will interfere with Company operations or adversely affect coverage of job and staff requirements. Whenever possible, employees’ requests for prescheduled PTO will be accommodated, but where scheduling conflicts arise, seniority and workload priority will prevail. Unscheduled absences are discouraged, except in emergency situations.
- Payment of unused PTO. Will employees be paid or forfeit the balance? Will payout be different when employees are terminated for cause vs. resign willingly? Be very specific. For example:Unless otherwise required by state or local laws, all accrued, unused PTO will be forfeited upon termination of employment. Any PTO taken that may have been advanced prior to accrual will be deducted from your final paycheck to the extent permitted by law.
Partner with TrackSmart for customization and simpler administration
With TrackSmart Attendance, it’s easy to set up multiple time-off banks, as well as manage carryover time using variables you pick. Depending on the type of PTO program you follow, you can also take advantage of the time-off accruals feature. Instead of doing things by hand or shuffling multiple employee files, everything is done accurately and automatically for hassle-free tracking and administration.