What Does Paid Time Off (PTO) Mean?

?PTO is a significant benefit that many companies offer to full-time employees. PTO can take several forms, from dedicated vacation and sick days to a bucket of accrued hours for workers to use as they wish. Some companies offer unlimited PTO to entice workers and provide maximum flexibility.

When a company extends a job offer to a candidate, they often include some mention of paid time off in the verbal or written offer. Paid time off (PTO) is more common among companies with full-time employees, although some companies take the additional step of giving it to their part-time staff.

Navigating PTO structures can sometimes be confusing, especially for companies offering it as a single benefit. Other companies continue to offer a traditional model, wherein employees receive a combination of vacation, sick, and personal days.

Understanding how PTO works is essential to maintaining a healthy work-life balance. Knowing when and how to request time off can help business owners or managers plan for seasonality.

PTO is a crucial benefit for attracting and retaining talent. Workers should expect and plan to use it fully.

What is PTO?

PTO is precisely what it sounds like: paid time off from work. But whereas companies previously offered their employees set numbers of days for vacation, personal use or illness, PTO policies now tend to lump these things together into one bucket of hours.

Switching from giving employees specific time off for illness, vacation and personal use to a “one-size-fits-all” approach comes with its pros and cons, so it is crucial for any organization making this change to understand what it entails.

What Are the Benefits of Using PTO?

Flexibility is one of the biggest benefits of using a PTO policy as opposed to the traditional method of allocating days off.

In the past, workers who needed to take time off to attend parent-teacher conferences or other events that fell outside of “sick time” would need to falsify the reasons for being out. This was mainly if they had already used their allotted personal days. PTO policies remove this restriction and trust that workers will balance their need for time off and be responsible.

Blanket PTO policies also allow workers to use time in hours versus days. Employees who need a few hours off to go to the doctor do not need to burn an entire day of PTO. They can use a part of those banked hours for the appointment and then return to the office (or book the appointment for later in the day and leave early).

A good PTO policy allows managers to approve time off without policing their usage. It helps the employer manage unscheduled absences and helps workers schedule time off in advance to maintain solid coverage.

What Are the Challenges Associated With PTO?

The single-bucket PTO approach is not without challenges. New employees sometimes accumulate PTO slower than associates with longer tenure, which can create an imbalance in time away from work. But the more significant issue stems from a PTO policy’s flexibility.

Employees may view PTO as vacation time alone and come to work when sick. This can create issues in the office, especially during cold and flu season. On the flip side, employees who need to use their PTO days to care for sick family members may not be able or willing to take time off for vacations, which can be a recipe for burnout.

How Does PTO Work?

How PTO works depends on the organization. Some companies allocate hours and days at the beginning of a calendar or fiscal year. Once employees exhaust those days, they no longer have PTO for the remainder of the year.

Other companies allow associates to accrue PTO with each pay period, up to a certain amount. This number of days typically correlates with employee tenure/length of service. For example, an employee with one year of service may have 10 days of PTO, while one who has been with the company for five years might get 15 days.?

Some companies allow workers to carry over PTO they have not used, although there is typically a hard limit to these days or hours: up to five days, or 40 hours.

Traditional PTO plans—the ones with broken down buckets of days—provide an average of eight to 22 days per year: between seven to 19 sick days and four personal days.

Who is Eligible for PTO?

Companies determine PTO eligibility on their own. There is no national mandate for sick leave or vacation time. Most companies do have formal PTO policies in place. Most of the time, PTO policies apply only to full-time workers. Companies who do offer PTO to part-time workers need to spell out available time and rules around usage.

Independent contractors (1099 workers) are also usually not eligible for PTO.

Is PTO Accrued Over Time, or Is It Unlimited?

Unlimited PTO is a relatively new offering that differs from PTO accrual. In this system, workers appear to have no limits on PTO to use for various reasons. Roughly one in 10 companies have adopted this policy because it is an attractive recruitment tool. In this situation, companies allow workers to take time off without subtracting those days from a balance.

Unlimited PTO does have another benefit for employers. Because workers do not accrue any time off, companies do not need to pay out any portions of PTO that workers do not use. This saves on overhead costs. While employees still need to record the time they are out of the office, it cuts down on administrative work determining who still needs to take time off.

Some employees hesitate to use their unlimited PTO benefits because they do not want to abuse the privilege. In these situations, it is helpful for companies to provide guidelines about minimum PTO usage and to encourage ways for workers to take PTO that do not involve weeklong absences.?

Different Types of PTO

Employees of companies that still adhere to the old ways must understand the different types of paid time off that employees are eligible for beyond traditional vacation time. Some other types of PTO do not fall under the traditional model.

Sick Days

Sick days are just that: paid time off is meant for employees to use when they (or a family member) are ill. Workers who exhaust their sick days may need to dip into other types of PTO to help cover absences or chronic illness. They may even need to explore going on medical leave.

Parental Leave

Parental leave is PTO employees can use when bringing a new baby home from the hospital. The most common type of parental leave is maternity leave for new mothers. Maternity leave refers to the time a new mom takes off from work after the birth of a baby.

Maternity leave may not be PTO: Companies allow workers to take maternity leave from a mixture of sick leave, vacation time, personal days and short-term disability. It is vital for new or expectant mothers to understand the intricacies of their company’s policies.

Some companies have recently started allowing new fathers to take paternity leave. Paternity leave allows new fathers to bond with children, assist at home and reduce burnout among working mothers.

Paid Holidays

Paid holidays are available to many workers on days when the office closes due to a national holiday. Standard paid holidays among corporate workers include:

• Thanksgiving Day.
• Christmas Day.
• New Year’s Day.
• President’s Day.
• Fourth of July.
• Memorial Day.
• Labor Day.

Paid holidays vary by business. Some companies remain open these days and pay their employees overtime or an additional bonus for working on those days.

Personal Days

Personal days allow workers to take time off for matters beyond illness. Employees can use them for jury duty, religious holidays, family illnesses and more.?

Wellness Days

Many companies offer wellness days instead of sick days. Employees can use this time to do something healthy or rewarding. Some companies may mandate office-wide wellness days by closing the office. In some cases, companies have renamed “sick days” to “wellness days” to remove the stigma of taking time off to recover from an illness.??

Final Thoughts: How to Effectively Use PTO

No matter what kind of PTO structure a company uses, workers should be clear about the expectations surrounding this benefit. Employees who work for companies with unlimited PTO should make the most of it. PTO is a benefit that allows workers to recharge, recover or spend time with family. An employee who takes advantage of their PTO benefits is likely one who is more productive and happier.?

Top Takeaways

• PTO policies replace traditional methods of allocating time off, like vacation days, sick days and personal days. Not all employees are eligible for PTO.
• Companies can allow employees to accrue PTO based on tenure or they may offer “unlimited” PTO that employees can use as they like.
• Both types of PTO have pros and cons.
• Workers may use PTO to cover illnesses or family needs and not have time for a vacation.
• Workers may use their PTO for vacations and come to work sick. Employers must find a way to balance these considerations.

(Reporting by NPD)