Vacations and other forms of paid time off (PTO) are on the mind of employees and business owners alike. PTO is a crucial piece of a healthy and productive workplace, and top talent job seekers are looking at your paid leave policies before applying for a position.
Don’t miss out on the best talent—implement a PTO policy that benefits you and your employees alike. Here’s how to get started.
Related: Holiday Policies That Employees Want
What Is PTO?
Any paid leave programs are called paid time off, but the abbreviation PTO typically refers to a policy that offers paid time off for a specific number of days. Instead of creating separate pools of allowances for vacation time, personal days, sick days, etc., PTO bundles all of it into one place for employees to earn and accrue over time.
PTO usually gets credited to employees based on the number of days or hours they work throughout the year. There are no set rules for how much PTO employers offer—it’s up to the business owner to decide on the details.
Types of Leave
There are four main types of leave that PTO can apply to:
- Bereavement: many companies don’t offer bereavement pay but allow employees to use their PTO to cover that time. Typically, bereavement policies allow for a certain amount of unpaid leave, and employees can use their acquired PTO to take additional time off.
- Medical: the FMLA requires all employers with 50 or more employees to provide their employees with 12 weeks of leave to care for a family member in certain situations. Because this is unpaid leave, employees may be able to apply their PTO to this 12 weeks of leave.
- Maternity: many businesses offer maternity leave in addition to PTO. How much paid maternity leave they offer depends on the company policy. Under FMLA regulations, an employee can take 12 weeks of unpaid leave during a 12 month period to care for their newborn child.
- Paternal: many employers offer paternal leave on top of PTO, and this time falls under the FMLA. Some states have additional laws regarding specific paternal leave conditions.
- Vacation: most employee’s favorite kind of PTO—vacation time—lets them enjoy some paid time away from the company to unwind. Even the most renowned workaholics need time to themselves every now and then.
Benefits of PTO
Three significant benefits of offering a PTO program are:
- Flexibility for employees and HR: PTO offers flexibility and autonomy for both employees and your HR team. PTO does away with the need for employees to explain (perhaps untruthfully) their reasons for wanting time off. For HR, they get to save time tracking and determining if an employee’s absence was due to a common cold or if they were using a personal day or vacation time.
- Reduced absenteeism: isn’t it strange that employees seem to get sick the most on Mondays and Fridays and end up with a three-day weekend? Huh. PTO programs help reduce the number of unscheduled employee absences. If they can take a day off “just because” without repercussions, they don’t need to find an excuse to take an extra day or two.
- Boost morale: rested, healthy, and happy employees are the most productive—we think all business owners can agree on that. Employees with access to PTO that they can use at any time are a huge morale booster; say goodbye to employee burnout once and for all.
Choosing the Right Model
Let’s look at a few different types of PTO models:
- Traditional leave policies: these policies offer employees certain amounts of vacation and holiday time and sick and personal days. This time is typically earned based on an employee’s tenure. While these policies offer HR a lot of insights, it also creates more administrative work for them.
- PTO Banks: this model offers a set number of hours that employees receive as PTO, which they can use for anything from vacation and sick days to “just because” days. PTO bank policies vary between companies and are influenced by state laws.
- Unlimited PTO: contrary to what businesses might think, offering unlimited PTO typically benefits the business more than the employee. Employees tend not to want to come off as greedy by using their unlimited PTO, leading to its underuse in most companies. But, when done right, these policies can strengthen a business’s relationship with its employees.
Related: Pros & Cons of Unlimited PTO
Tracking PTO
Depending on which PTO policy your business uses, your HR team could incur massive workloads regarding the tracking of employee time off. Even with bundled PTO policies that reduce their depth of managing things like limits, caps, and payouts, it’s a good idea to support your HR team with the right tools.
A Human Resource Information System (HRIS) can boost the efficiency of your HR personnel by helping them track, manage, and report PTO benefits for employees.
Communicating PTO Policies to Employees
Here are some PTO best practices to keep in mind when sharing your policies with your employees:
- Employee handbook: the best (and easiest) way to communicate with your employees about your PTO policies is in your employee handbook. Whether your employees want all of the technical details about the policies, or if they’re only interested in the amount of PTO they receive, outlining the benefits and providing details in the handbook makes that info easily accessible to all employees.
- Potential gaps in communication: one of the best things you can do is ensure that there aren’t any gaps in communication with your employees. Basically, make sure that everyone understands their PTO benefits and their limitations so that every employee is on the same page.
- Employee orientation: when you’re onboarding your new hires is the best time to go over your PTO policies with them. Give them a brief introduction to their new PTO benefits and show them where they can find more information in their employee handbook.
PTO Laws and Compliance
It’s important to understand that there are both state and federal guidelines regarding PTO. On the federal level, the only required paid time off you have to provide is job-protected, unpaid leave for instances defined by the FMLA.
State laws, on the other hand, vary widely. There are no state laws that require employers to provide paid vacation time, but some states require you to offer paid sick time. It’s essential that your HR team is aware of state regulations regarding PTO before implementing a new policy or changing an existing one.
Creating a new PTO policy or overhauling an existing one? Get in touch with Reverb to ensure that you’re making the right changes for your business.
