A paid time off (PTO) policy combines vacation, sick time, and personal time into a single bank of days for employees to use when they take paid time off from work. A PTO policy creates a pool of days that an employee may use at his or her discretion.
When an employee needs to take time off from work, the PTO policy enables a certain amount of the time off to be paid hours. The employee may use the PTO at their discretion. Whether they need the time for doctor's appointments, kid's school conferences, to pick Johnny up at the bus stop, to wait for a furnace repairman to arrive, or to recover from the flu. The time use is no longer the business of the employer which is another step in the direction of treating employees like the adult people they are.
Protecting Both Worker and Employer
So, employees who may have lied or made up stories about how they were using their time in the past, have the right to take PTO at their discretion to support work-life balance and flexibility. This has allowed employers and employees to stop the practice of employees needing to ask permission from their manager to miss work.
To protect the company workload and customer service, you'll want to require that employees request PTO with at least two days prior notice unless the employee is truly sick which is often not predictable. Establish other guidelines, as needed, for employee sickness, vacation, and personal time before you adopt a PTO policy.
Employees tend to react unfavorably when a new system is adopted and the rules and guidelines dribble out later after the policy is in use. So, think carefully about the ramifications of the decision and make every effort to fully inform employees of all related policies and guidelines prior to its adoption. Your goal is to make your employees right from the start of a new policy implementation.
Benefits of a Good PTO Policy
A good PTO policy can offer benefits to employees and businesses alike. You treat employees as adults who are entitled to use PTO at their discretion without oversight. Managers are not put in the position of having to police their reporting employees' use of their benefit, paid time off.
PTO gives the employer some control over unscheduled absences, a serious problem, and cost for many. Employees can schedule time off in advance which assists with work coverage.
Employees value the flexibility that PTO provides. It gives them the option of using paid time off when they most need it—whether to care for a sick child who can't go to daycare or to take a vacation with the family at the beach.
In the past, employees may have been untruthful about why they needed to take time off from work because they wanted their manager to think positively of them. PTO, in allowing them to make adult decisions, provides no reason for employees not to tell the truth.
Employers can address employee attendance only with people who are gaming the system or having attendance problems, rather than having to impose a lot of rules and guidelines for your average employee who attends work regularly with no problems.
Disadvantages of Paid Time Off Policies
Of course, with every silver lining comes a dark cloud, and PTO policies are not immune to downsides. Some research shows that employers who adopt PTO may give employees fewer overall days than they had previously, and/or new employees accumulate PTO more slowly than longer-term employees.
Employees tend to view PTO as a benefit and use all of the time off, whereas they may not have in the past when they had time off for personal days, sick days, and vacation. Americans, especially, are notorious for not taking paid vacations and other paid time off of work.
Employees tend to view all PTO time as vacation time and come to work when they are sick. Employers can discourage this practice with absenteeism management in action. Managers in the organization need to set the pace and expectations and model appropriate time off work behavior for employees. Coaching can also help address the issue of employees coming into work sick.
In a 2016 survey conducted by the Society for Human Resource Management (SHRM), "The majority of organizations offered PTO plans (87%) and paid vacation plans (91%) to employees based on their length of service at the organization. For PTO plans, the average leave days awarded per year based on employee's length of service ranged from 13 to 26 days and eight to 22 days for paid vacation plans."
In a study conducted by the WorldatWork Association in September 2014, the average number of PTO days offered by employers was:
- Less than one year of service: 16 days
- 1-2 years of service: 18 days
- 3-4 years of service: 19 days
- 5-6 years of service: 22 days
- 7-8 years of service: 23 days
- 9-10 years of service: 24 days
- 11-15 years of service: 26 days
- 16-19 years of service: 27 days
- 20+ years of service: 28 days
You'll want to take a look at the whole survey report about paid time off. In addition to the range of paid time off days that employers offer, the rest of the employee benefit, paid time off, is explored.
In several of the service periods of time, the number of days of paid time off dropped between their 2010 survey and the 2014 survey.