When an employee has to take time off from work, the Paid Time Off (PTO) policy allows for a portion of that time off to be paid. The PTO policy combines holidays, sick leave, and personal time into a single pool of days that employees may spend while taking paid time off from work. Employees taking PTO may use their days off at their discretion, meaning that an employer does not get to investigate the reason why, because it is part of the employees’ right. So, how does the PTO policy work?
How PTO works
The structure of a company’s PTO policy defines the amount of paid time an employee may take from work along with the rules for or requirements to take it. When it comes to PTO rules, companies have three options: standard PTO systems, PTO bank systems, and unlimited PTO systems.
1 . Standard PTO systems
Standard PTO systems give employees a predetermined number of days to utilize PTO for a specified purpose. As employees’ period of employment with the company grows, many companies raise the amount of time off they get. This provides employees with the least amount of flexibility in deciding how they spend their time off and demands a significant level of administrative control from the company. Unless they are utilizing a sick day, employees must generally seek time off in advance and their employer must authorize it.
2 . PTO bank systems
PTO bank systems mix all of the days that a company would provide employees for vacation, personal leave, sick days, and occasionally holidays into a pool of total paid time off hours. The PTO bank makes no distinction between how employees can use their free time. Instead, it essentially displays the total number of hours available to employees. As a result, PTO bank systems simplify calculations for companies and give employees better flexibility than standard PTO systems.
3 . Unlimited PTO systems
Unlimited PTO systems are results-driven PTO management systems in which the company does not limit the amount of days or hours employees can take. Instead, these systems allow employees to take time off whenever they need to, as long as it does not interfere with their job or harm the company’s productivity. Most companies who utilize unlimited PTO systems do not require their employees to record the time they take off, and their manager has the authority to accept or refuse it. While this may sound too good to be true, some companies actually implement this.
The number of days or hours of PTO in a company may differ from others. Usually, this is also regulated differently in each country, so make sure to consult your country’s policy on it.
Read Also: What You Need to Know About Sabbatical Leave
Benefits of PTO
A strong PTO policy may benefit both employees and companies. PTO offers the company some control over unexpected absences, which seem to be a severe problem and a significant cost for many. Employees may arrange time off ahead of time, which helps with work coverage while they are awa. Here are more detailed benefits of PTO for both the company and employees:
1 . Benefits for the company
Although companies carry the financial burden for employees’ paid time off, the return on investment is significant. Employees are more likely to inform their employer of potential absences when they are allowed to take time off from work. When employees take time off from work, companies may expect them to be more honest. Employees who are permitted to take vacation and personal days should not be forced to lie about or conceal the actual reason for their absence.
Another benefit of PTO is that it can reduce both burnout potential and employee turnover. PTO prevents employees from working for extended periods without rest, which raises the risk of burnout. When burnout becomes a problem, companies have greater turnover rates and must spend more money training new hires to replace those who resign. Thus, PTO serves as a tool for the company to prevent spending extra budget for hiring when the turnover is high.
2 . Benefits for employees
Increased productivity benefits both employees and companies. It is no doubt that prolonged periods of work with insufficient days off may cause exhaustion that can lead to loss of motivation. By taking time off without having to be medically troubled or worrying about a wage cut, employees can recharge themselves. Although they have to notify managers in advance, employees can be discreet about their reason for taking days off, thus increasing their trust and loyalty to the company.
With PTO, employees are also better prepared to achieve a work-life balance that relates to their personal objectives, values, and desires. Taking PTO allows employees to attend to other responsibilities in their life. They may use their PTO policy to attend to things like doctor’s visits and driver’s license renewals without losing their pay.
If your company has no PTO policy in place yet, HR leaders should speak with top management about the benefits of doing so. After all, PTO is one effort that must be driven from the top. Aside from PTO being an effective non-cash benefit that increases retention, it can also develop a positive working culture in your company that humanizes employees.