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Everything Your HR Team Ever Wanted to Know about PTO

Types of PTO structures, types of leave, PTO policies, and more

by Elle Mason - January 10, 2022

In 2022, PTO is top of mind. From needing more time than previous years to manage health challenges amidst the pandemic, to simply wanting more mental health days and time to decompress from the stress of the office, workers around the country are planning staycations, vacations and time away from the office in general. In fact, PTO is one of the most desirable benefits that an employer can offer – but it comes in so many forms, making it difficult to know what’s best for your business. This article will be a complete guide to all things HR needs to know about PTO: From types of PTO structures, to types of leave, to creating a PTO policy, and even how PTO needs to change in the new year.

What is PTO? How can it impact small businesses?

PTO is paid time off that often comes in a bundled set of days per year. Most companies allow you to accrue it over time, typically a set number of hours or days per pay period, and then request it or use it when you need it. When it comes to paid leave more broadly, some businesses choose to differentiate between different types (sick leave vs. vacation leave) while a PTO policy that offers predetermined set of days or hours doesn’t differentiate between the types of leave.

There’s no one approach – businesses determine which approach works best for them. Some businesses offer PTO as a bundle, others opt for the traditional unbundled leave policy, while others offer unlimited PTO policies.

However, most PTO policies give employees between 15-20 days in addition to company-observed holidays. Companies that offer traditional leave policies generally offer 30 days arranged in a breakdown that consists of 10 vacation days, 8 sick days, 2 personal days, and 10 holidays.

Small businesses often have to plan carefully as the less structured options can leave them potentially too short-staffed for the business to function if everyone takes the same days. In these businesses, it’s common for people to rotate key vacation days (e.g. Christmas) or sign up / reserve vacation days well in advance so that people can plan coverage. It’s also up to the business to decide if PTO can rollover to the next year or if it must be used every year. While many employees like the rollover option as it can allow them to take off for a month or longer with careful planning, it can also be a good practice to encourage regular downtime by encouraging annual vacations. We discuss this more in our article on PTO balances and encouraging employees to step away from the office.

What types of paid leave are there?

Sick Leave: It’s highly recommended, especially given COVID-19, that employers offer Paid Sick Leave for employees to prevent the spread of illness. This can be included as part of the overall PTO policy or it can be it’s own “bank” of time.

We also discuss PTO for COVID-19 vaccinations in another article which will continue to be relevant this year as people receive boosters.

Medical Leave: The Family Medical Leave Act (FMLA) requires employers to offer 12 weeks of job-protected leave – which is typically unpaid, and extends to the employees and their dependents/ people they make take care of.

Bereavement: This is generally reserved for if an employee experiences a loss close to them and needs time for grief and/or arrangements. This is typically available as-needed.

Maternity and Paternity Leave: Parental leave is often included as part of PTO, ideally covering people of all genders who are expanding their families whether through birth or adoption. Several states like California, New York and Rhode Island require paid family leave.

What are the benefits of a PTO policy?

More flexibility: Employees don’t have to lie or give excuses for why they need time off – like proving that they’re physically ill when they actually just need a mental health day, for example. This gives them more autonomy and communicates that there’s mutual trust between themselves and the business.

Less absenteeism: When employees want to take time off but are forced to use specific forms of leave that don’t fit their situation (like sick leave when they actually want to go to a concert), they’ll have no choice but to call out of work at the last minute. Without this barrier, they can plan their absences in advance which is better for the business.

Better health: When employees have the opportunity to take vacation days and mental health days as they see fit, or visit the doctor’s office for preventative reasons without people questioning their health, they’re more likely to come to the office refreshed and rejuvenated vs. tired and burnt-out.

What parts of PTO expectations will change in 2022?

As we’ve discussed in other articles, the expectations around PTO are changing as the nature of work and our lives continue to change. For example, in 2022, there’s an increased focus on mental health, wellness, and inclusion – all of which are primed to impact about how employees think about PTO and benefits more broadly.

Additionally, parental benefits which were once a “bonus” are now becoming the standard expectation – and forward-thinking organizations are offering more than the 12 weeks that employees get from FMLA. 

Unlimited PTO is also increasing in popularity, and while some people are not proponents because the ambiguity can make it challenging for employees to know how much time is acceptable (leading to them taking less time than they ordinarily would), there are many candidates who view it as an enticing offer. There are a number of administrative benefits too, including:

  • Employers don’t have to pay out accrued PTO
  • It reduces the administrative burden of managing PTO
  • It helps employee recruitment and retention efforts
  • It conveys a commitment to health and balance

Lastly, COVID-19 has changed PTO expectations and best practices, which we discuss more in depth in our article on the topic. We also discuss how to craft a PTO policy and determine what’s the best approach for your organization as we navigate the pandemic and employee retention challenges.

What are best practices for PTO?

Ask employees what they want: The best way to develop an employee PTO policy that works for your organization is to talk directly to employees. While some employees may be thrilled with the idea of unlimited PTO, others would happily exchange it for a more robust parent leave policy. There are personality factors – but also generational and situational factors that will drive much of this, so try to tailor it to what’s best for your workplace.

Outline it clearly in the handbook: Finding out that you don’t have bereavement leave when you’re in the midst of grief is a nightmare. Be sure that every form of PTO, including how it’s accrued and what rolls over, is clearly communicated and accessible at all times. In the case of specific leave like parental and bereavement, be even more clear: Who is eligible? For how long? Is it fully paid or unpaid? Are extended family members covered? Answer all of these questions early and before employee’s need them.

Ensure that managers encourage time away: It’s nice to have PTO but it’s even nicer to be able to use it. Too many employees have unused PTO because while their compensation accounts for it, their workload or team culture doesn’t. Make sure that managers are not only accepting and approving PTO requests, but leading by example and taking time away from work themselves. If employees don’t see leadership taking breaks, they’ll assume they have to follow suit.

Other PTO FAQs

What is the difference between traditional paid leave and PTO?

Traditional paid leave is typically broken out into segments like: sick leave, vacation leave, holidays, etc. PTO typically is one large “bucket” that employees can use at their discretion based on their unique situations.

How far in advance should employees have to request PTO?

Typically, two weeks is the standard for planned PTO – like vacations or absences that are longer than a couple of days. But for emergency sick leave or bereavement, remaining flexible and accepting that these things often happen at inopportune times will go a long way.

Are we required to give PTO to part-time employees or contractors?

In many states, employers are required to provide paid sick leave, but PTO more broadly isn’t mandatory anywhere. With that said, extending the benefits that full-time employees receive to part-time workers and contractors can be a powerful way to ensure that they’re not treated or feeling like second-class workers in your organization. Furthermore, as many businesses are reliant on these talents, it would ensure that these businesses remain attractive options for candidates and workers who work outside of a full-time arrangement.

Do we have to pay unused PTO when employees leave the organization?

This depends on the state that you are in. States like California and Rhode Island do require it, but other states may refer to an employment agreement. It’s best to check the regulations for your state as it can also depend on if an employee is leaving voluntarily or not.

PTO compliance and anything HR should know from a legal standpoint

There are two major elements of PTO that vary by state.

  1. If “use it or lose it” policies are permitted. This means whether or not employees can lose their PTO if they don’t take it by a certain date (vs. allowing it to rollover to the next year).
  2. If employers are required to pay out unused PTO time when an employee leaves.

Employers should check the legal guidance based on the state(s) they operate in to stay in compliance.

GoCo can help track PTO

  • PTO ManagementWith GoCo’s PTO tracking platform, you can automatically add holiday hours to timesheets, easily track and approve time off (whether it’s vacation, personal, or sick time) and have it appear directly on timesheets — through the mobile app OR desktop! It’s also easy to track emergency paid sick leave amid the COVID-19 pandemic and stay in compliance with 2022 regulations.

See how GoCo can simplify your HR