Paid Time Off (PTO)

What does PTO mean?

Paid time off is also called as PTO. Each employer has the power to implement their own plan and accrual policies. Additional provisions, like rollover terms or PTO banks, vary significantly as well, but many organisations calculate paid time off based on length of employment or the average number of hours worked in one pay period. Generally, PTO hours cover everything from planned vacations to sick days and are becoming more prevalent in the field of human resource management. Unlike most of the traditional leave plans, PTO plans don't distinguish employee absences from personal days, vacation days, or sick days. On employment, the company determines how many PTO hours will be allotted per year and a "rollover" policy.

What are the best policies of PTO?

1) Flexible Time Off :

Flexible Time Off is also called flexible PTO or flexible vacation, this is time off that employees can take when they choose to and generally don't have to accrue or count the hours. Flexible PTO presents employees with a lump of PTO days to use however they choose (with management approval). Whether it is  for sickness, vacation,  employees have the freedom to decide how to spend their bank of PTO days

2)Unlimited :

This practice is rapidly gaining popularity, especially with startups. The unlimited Paid time off policy is a new concept that gives employees as much paid time off as they need or want with prior manager approval.

3)Earned :

Earned, or accrued time off is a kind of policy that distributes paid time off based on how long an employee has worked for the company. While a few numbers of days or hours are accrued each month, employers may also choose to give an extra allotment of PTO based on milestones with the company.

4)Traditional :

Traditional Paid Time Off offers a separate PTO time for sick, vacation, and personal days. Often based on time, this policy makes it attractive for employees to stay with the company. On the negative side, reporting may be difficult if employees use days outside of their intended designation.

5)Check Federal and State Laws :

One of the most important PTO best practices is understanding what you should offer by law. Federal Law does not require employers to pay out unused vacation time or to even offer a paid time off policy in the first place.

6)Combined PTO Banks :

A combined policy also means less tracking for Human resource and obviates the need some employees may feel to “prove” when they’re sick, But a combined model doesn’t work for everyone. It’s often unpopular among employees who have high health care utilization needs and are thus forced to use a disproportionate share of their time off on their medical needs.

7)Forced Time Off :

Research shows that people are most productive when they take breaks, yet many employees are reluctant to fully unplug because they fear doing so will put them behind. “I believe that employers are offering more time off, but I also believe that employees are more willing to work when they have time off,” Robertson says. Technology has made it very easy, some say too easy to remain connected while away from the office.”

8)Sabbaticals :

This program is designed to give employees time away from work [so they can] return to work not only refreshed but also excited about new ideas and ready to tackle new challenges,”

9)Floating Holidays :

Although there are no laws requiring employers to provide floating holidays, some leaders are rethinking the traditional one-size-fits-all approach to paid holidays, says David Woolf, Philadelphia-based partner with the Labor and Employment Group. It’s a strategy that acknowledges the increasing diversity of today’s labour market, he says.

What is the difference between PTO and Vacation?

PTO is something when an employee is being paid while away from work and not working. It’s basically any paid leave. PTO is broader than a vacation. Vacation is a subset or an example of Paid time Off. Vacation is PTO, but PTO might not necessarily be a vacation.The essential difference between the two is that PTO covers any paid time away from work where the employee is not working; in contrast, vacation time refers to the paid time off that’s taken for the employee to take a break with or without their family. It’s generally requested (and approved) in advance. In this regard, vacation is just a type of PTO, but paid time off may not necessarily refer to vacation. Meanwhile, read why working from home is a great management strategy.

What is flexible time-off?

Flexible time off (FTO) is a paid time off (PTO) programme that allows employees to take an unlimited number of days off. The hours that employees take off do not have to be earned or accrued in most situations. This differs from more traditional work environments, where each pay period is allocated a predetermined number of hours of paid time off. Employees can take advantage of their flexible time off for vacation, sick leave, or other reasons that might normally require them to miss work.

Some companies give an unlimited amount of flexible PTO, while others have a defined number of days that employees can utilise each month or year. The fact that flexible time off is combined with both sick leave and vacation time is the most important feature. Instead of receiving five days of sick leave and ten days of paid time off every year, an employee would be given a total of 20 flexible time off days to utilise as they see fit.

Pros And Cons Of Paid Time Off (PTO) Policies


1) To some employees, a PTO policy likely seems fairer; everyone gets the same number of days (or accrues them at the same pace) and can use them in whatever way makes the most sense to them. If they decide to use one extra day towards vacation that one of their colleagues might use to take care of a sick kid, it all shakes out to be equal.

2) For employees who are generally healthy and have healthy families, this can be a great benefit. Since every employee is allowed to take days off as they see fit, they can apply what would have previously been a sick day toward a vacation, or use them to handle personal tasks.

3) Less structured PTO plan might be a recruiting advantage in some industries. Young employees might be willing to take slightly lower pay if their overall compensation package includes a generous PTO package that can be used for vacation and personal time.

4) For employers and human resource managers, this kind of time off plan may remove some tedious tasks from the workload. Instead of the administrative headache of managing various time off categories for each employee, managing a PTO plan is a simple matter of noting when an employee uses some of their banked days of PTO.

5) A loose flow PTO plan is also likely to reduce the number of last-minute “sick day” call-ins from healthy employees who are out of personal and vacation days but need to take a day off nonetheless. In a Paid time Off-plan, any employee can just tell their supervisor ahead of time that they plan to use their time off on a given day, and the remaining staff’s workload can be adjusted accordingly.


1) With a Paid Time off-plan, the burden of allotting time off for various reasons falls directly on 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, employees may find it difficult to plan and use their time off appropriately.

2) Cautious employees will likely end up using fewer vacation days so they can hold onto PTO in case of an emergency. Employees with children or a health problem that requires regular management will also likely end up using most of their PTO on sick days. These employees will be more likely to burnout or frustration with their jobs since they have no officially sanctioned vacation time.

3) Less cautious employees might see that they have 20 days of PTO and plan 20 days of vacation, leaving no wiggle room for unexpected circumstances like illness or personal errands that may arise.

4) Generally, when publishing a PTO plan, there is some sort of buyout clause in employee contracts. If several employees with ample PTO days leave, there may be a significant unforeseen financial burden on the company to pay them for their unused time off.

Types of PTO

1. Vacation days

Vacation pay is paid time off that you give employees to travel, spend time with family or friends, or take a break from work. 77%  of the employees get paid vacation days.

A typical vacation policy should explain the rules relating to when and how employees can take off for vacation. For instance, you may want employees to give you ample notification before using vacation days.

2. Sick leave

Paid sick leave is a kind of time off that an employee can use when they are sick or injured. Offering sick pay might reduce the chances of illnesses going around your small business by encouraging sick employees to stay home.

Depending on where your business is located, you may have to offer sick pay. Check with your state and follow mandatory sick leave laws.

3. Personal time

Employees can use personal time off to handle things like doctor’s appointments, car checkups, attending events (e.g., parent-teacher conferences), and anything else that doesn’t fall under sick or vacation time.

Personal time does not have to be used for anything specific. Employees can use personal time without having to jump into their vacation days.

4. Holidays

Holiday pay compensates employees for time off during vacations. According to the BLS, employees who earn holiday pay received an average of eight paid holidays per year.

You can follow the federal holiday schedule when determining which days employees have off. Instances of federal holidays include Memorial Day, Thanksgiving Day, and Christmas Day.

You may also provide floating holidays to employees, which are days off they can use at any point in the year.

5. Bereavement

Paid bereavement leave is that kind of time off employees receive when a family member or friend passes away. Employees may use bereavement to cope with their loss, make arrangements, and attend funeral services.

Some businesses give you different amounts of bereavement time off, depending on the employee’s relationship to the deceased. Be explicit when creating bereavement time off policy. And, you may want employees to provide proof, such as an obituary or funeral program.

6. Parental leave

Paid parental leave is a kind of time away from work that employees can use for maternity leave, paternity leave, or adoption.

Under federal law, you may be required to offer unpaid parental leave, depending on your business size. And, your state can have more restrictive parental leave laws.

7. Jury duty

If an employee is called to serve in a jury, you might offer jury duty pay for the time they are away. You must offer paid jury duty if your state has duty pay laws.

A federal, state or local court would send your employee written notice summoning them for jury duty. You may require that the employees show you their jury duty summon letters before offering them paid jury duty.

8. Voting time

Paid voting time is a kind of time off employees can use to vote in presidential and local elections. Normally, paid voting time is limited, as employees only need a few hours to vote.

According to a study,44% of employers offer employees paid time off to vote. Your state may require you to offer paid or unpaid time off to vote.

9. Military leave

You might also provide paid military leave to employees for active duty, active duty for training, or inactive duty training.

All employers should follow the USERRA(Uniformed Services Employment and Reemployment Rights Act). USERRA requires offer an unpaid leave of absence to employees in the military for up to five cumulative years.

10. Compensatory time

Compensatory time is paid time off that employees receive in lieu of receiving overtime pay. But in many cases, offering comp time is illegal.

You cannot give comp time to the non-exempt employee if you own private, non-governmental business. 

Through PTOs and other similar benefits, you can ensure higher employee retention rates and employee motivation.

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